Steps to Create an investment portfolio

Steps to Create an investment portfolio

If you are interested in investing, you need to understand how an investment portfolio works.

Some traders operate intra-day or perform a few operations a week. They are born speculators, they do not apply fundamental analysis to their investments, but are based on criteria of technical analysis and monetary management.

Some invest their money and diversify their resources in different investment vehicles. (ETFs, CFDs, Bonds, Stocks, etc). This way of investing requires knowledge about the valuation of companies, considering their profitability, their solvency, the payment of dividends, the sector to which they belong, their growth expectations, etc. 

We present the considerations that you should start making yourself so that you become an investor with solidity and constant profits.

What is your financial status?

Before you start building your complete financial portfolio, make a list of everything you have.

It includes assets like cars, stocks, bonds, mutual funds, cash, and bank accounts.

Then, make a list of everything you owe, such as mortgage debt, credit card balances, and loans in general.

Your balance sheet is a benchmark against which you measure yourself as you build your financial future.

This balance is going to be extremely important as you work your way through the next steps. 

Commit to change

The key to changing your life is determining exactly where you are right now and where you want to go.  Be brave enough to see the whole picture.

The process of building a complete financial portfolio can take years. But don’t despair.

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If you are disciplined you will reach your goal, so do not lose hope. Commit to improving your finances and remind yourself of this commitment often.

Pay your debts.

The next step in building your complete financial portfolio is to develop a plan to pay off personal loans, credit card, or mortgage debt.

Classify your debts by interest rate.

Take the balance sheet you prepared and on a separate sheet of paper, rank all your debts by interest rate starting with the highest.

Allocate as much money as possible to pay down the debt. Decide how much you can put toward debt reduction each month from your regular income. In case you get extra income, consider making an accelerated payment plan for these loans. 

Release that charge so you can use your energy to build wealth.

Your personality and risk tolerance.

Are you willing to risk the potential loss of some money for the possibility of higher profits? 

Everyone would like to get high returns year after year.

But if you can’t sleep at night when your investments are falling short-term, the high returns on those types of assets most likely aren’t worth it.

Asset types 

Once you have determined the correct risk allocation, you must divide your capital among the asset classes.

At a basic level, this isn’t difficult: stocks are stocks and bonds are bonds.

The bond portion could be allocated between short-term and long-term, government debt versus corporate debt, and so on.

Stock selection – Choose stocks that meet the level of risk you want to take; the sector, market capitalization, and type of shares are factors to consider. 

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Bond Selection – When choosing bonds, there are several factors to consider, including coupon, maturity, bond type, and credit rating, as well as the general interest rate environment.

Mutual Funds – Mutual funds are available for a wide range of asset classes and allow you to own stocks and bonds that are professionally researched and chosen by fund managers.

Of course, fund managers charge a fee for their services, which will hurt your profits.

Index funds present another option; They tend to have lower fees because they reflect a set index and are therefore passively managed.

Exchange Traded Funds (ETFs) – If you prefer not to invest in mutual funds, ETFs can be a viable alternative. 

ETFs are essentially mutual funds that trade like stocks.

They are similar to investment funds, they represent a basket of shares, usually grouped by sector, capitalization, country, and the like.

ETFs also cover a wide range of asset classes and can be useful in rounding out your portfolio.

The final result

Throughout the entire portfolio construction process, you must remember to keep your diversification above all else. 

It is not enough to own securities of each asset class; you also have to diversify within each class.

Make sure your investment securities that fall within a certain asset class span across several other sub-classes and industry sectors. Diversify!

These investment vehicles allow individual investors with relatively small amounts of money to realize economies of scale, such as those enjoyed by large fund managers and institutional investors.

In summary: to earn money consistently, with acceptable results with your investments and in the markets you need knowledge, experience with proven methods, and a good attitude. Most people do not meet these requirements.

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Have you ever wondered why economists, with all their knowledge, are not a privileged segment of the population, since they do not achieve great fortunes managing their own money or that of others?

Earning money is not difficult, we assure you. Never before have there been so many opportunities to get rich through multiple investment options. With easy access to the Internet, you have at your fingertips, at the click of a button, the financial markets of the whole world. If you like networking and are active on social networks, there are many interesting opportunities to create a lucrative business.

You are living in an extraordinary stage to be able to become a millionaire in much less time than your parents or grandparents would. A hundred years ago, a person needed a lifetime to earn a million. Today, young millionaires around the world, aged astonishingly 21 and over, have net worths of unbelievably high numbers.

Being consistent in investments, and obtaining an acceptable average economic return, means preparing yourself, and acquiring specialized knowledge because you cannot be an expert in everything. It will take you some time to master the science of investing in the stock market, of building a portfolio of assets. If you do, you’ll be way above the average person who sees investing as complex, difficult, and always losing money. Your experience will tell you exactly the opposite.

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