5 Steps to Help you Construct an Investment Portfolio
When establishing or reviewing a portfolio it is important to have a clear process. Here is one that has stood the test of time.
Step 1. Assess your goals and circumstances.
The investment plan process begins with an understanding of your financial values and goals, as well as your key relationships, existing assets, other professional advisors, preferred process, and important interests. Write these down first.
Step 2. Set long-term investment objectives.
Next, (taking into account the long-term nature of successful investing), set objectives for your portfolio that are appropriate for your willingness, ability and need to take risk – along with the investment horizon(s) you identify.
Step 3. Plan your asset allocation.
Because it is so important, asset allocation should be the first investment decision. During this process, establish your attitude to risk. Then, determine how much of your portfolio to invest in each of the different investment types or asset classes, including: shares, bonds and short-term investments – both domestic and international.
Step 4. Select your investment approach.
With an asset allocation in place, now select the investment vehicles that you will use to implement your portfolio strategy. Two key investing principles guide these decisions – the importance of diversification and the value of remaining invested.
Step 5. Build your portfolio.
Building on the first four steps construct a portfolio suited to your needs, goals, investment horizon and risk attitude.
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It’s your future.
Here’s to smart investing using science not guesswork.