How to Build an Investment Portfolio



In today’s precarious financial environment, it has become more important than ever to build an investment portfolio. Anyone in the financial world will tell prospective clients that diversification and proper planning are essential to an investor’s success. As for individual investors who are just getting started, they need to know how to structure their asset allocation in order to achieve their personal investment goals and strategies. The end result should be an investment portfolio that meets an individual’s future financial needs and provides the investor with a sense of security. There are different ways to go about building a financial portfolio. The question is–what approach will work best for the individual? In answer to that query, here are some suggestions on how to build an investment portfolio.

When crafting a portfolio, an individual’s financial circumstances and investment goals must be determined. Factors to consider include the amount of the investor’s ready capital, age, life expectancy, health concerns, how much time for investments to grow and/or mature, as well as their future capital needs. Obviously, a young, single college graduate, who just secured their first lucrative job, will likely require a different investment strategy than that of a middle-aged, married individual who is expecting their first child and the costs associated with it (e.g. child care, education, life insurance, health care, etc.).


Another important aspect to ascertain is whether someone should have a conservative or aggressive portfolio. This depends largely on the individual investor, their available capital, and risk tolerance. In most cases, the higher an investor’s risk tolerance, the more aggressive their portfolio. Meaning, if someone is an investor who is willing to take more chances, their higher risks will likely yield greater rewards. This form of investor will usually opt for more equities and fewer bonds and/or other fixed-income securities. On the other hand, if someone has a low-risk tolerance, their portfolio will be more conservative. This form of investor will focus on bonds, mutual funds, and other fixed-income securities while avoiding high-risk equities. The end goal of a conservative portfolio is to protect its value and provide some long-term capital growth potential. Meanwhile, the goal of an aggressive portfolio is aimed at acquiring more income and capital growth via higher risk investment sources.

Potential investors must also be cognizant of the fact that building a portfolio takes time and patience. It will not happen overnight, and in the same vain, clients who are starting out should not obsess over the day-to-day fluctuations in the market. They need to understand that markets and futures can be quite volatile. Markets shift from day-to-day and even month-to-month.  However, these fluctuations will stabilize over longer periods of time. It is important to establish an investor’s portfolio and allow it to mature. If changes and/or adjustments are needed, it will become apparent over time.

The one constant investors must adhere to is the need for a well-diversified portfolio. This is an investor’s best chance for long-term, reliable asset growth. Moreover, diversification protects an individual’s portfolio from the risks associated with sharp declines and unforeseen changes in the economy.


As investors learn how to build an investment portfolio, they need to know how to structure their asset allocation in order to achieve their personal investment goals and strategies. In doing so, there are several factors that must be considered. Some of these factors include a client’s liquid assets or ready capital, their marital and/or family status, health considerations, and the amount of time an individual has to grow their investments. Whatever approach an individual uses to grow their portfolio, the end result should feature a portfolio that is well-diversified, meets an individual’s future financial needs, and provides the investor with a sense of security. At the end of the day, investment strategies will vary depending on a person’s financial and personal circumstances. This is an aspect of building a financial portfolio that many prospective investors might not consider but should be aware of prior to making their initial investment.

Written and Edited by Leigh Haugh

Forbes–How to Build an Investment Portfolio: Eight Essentials
Money–5 Simple Steps to the Perfect Portfolio
Investopedia–4 Steps to Building a Profitable Portfolio
Merrill Edge–3 Simple Steps to Building a Balanced Portfolio
All Article Images Courtesy of WikiMedia Commons – Creative Commons License

2 thoughts on “How to Build an Investment Portfolio

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