If you’re saving for retirement then, chances are, you already have a stock portfolio. It’s an investing term to describe your total wealth from stocks and shares. It could include individual share holdings and investment funds such as ETFs and investment trusts.
A stock portfolio is an investing term to describe all your stocks and shares and investment funds.
It’s part of your broader investment portfolio. As well as stocks and shares, your investment portfolio could include all sorts of treasures such as commodities, bonds, cash or investment property. A portfolio is sometimes also known as your investment holdings.
An investment portfolio is a tool to help you grow your future wealth and achieve your financial goals. Your investment will hopefully increase in value and earn you income over time.
Think of your investment portfolio as a bit like a house you are building. Every time you add to your wealth you are building the house and getting a little bit closer to reaching your investment goals.
Your investment portfolio will grow in several ways including the following:
There are loads of different ways to manage your investment portfolio. Here are some of the main options.
You can see your portfolio if you log in to your pension provider, share dealing platform or stocks and shares ISA provider. If you have several different investment platforms then it’s a good idea to keep a record of your total investment wealth. This will make it easier when it’s time to complete your tax return or when you need to make investing decisions.
There are as many different types of investment as you can shake a stick at. These all, taken together, form your total investment portfolio.
Here are some of the most common types:
Yes. You do need some sort of investment portfolio to provide an income in retirement and help you achieve your future financial goals. But what you invest in is up to you. You can build an investment portfolio to suit your needs.
There’s no right way to build a portfolio. The main thing is to get stuck in and start investing.
You can pick individual shares or you can go for investment funds or ETFs. Many investors decide to start with a simple index tracker fund. That means you’ll be invested in the whole stock market rather than in just a few companies. You also won’t have to make any complicated investing decisions as the fund will be invested across a wide range of companies.
Every investor is different and their investment portfolio and investing strategy can be built to suit their aims and needs.
Short-term investors who are saving up for a house deposit may decide to invest in cash, because they will need the money soon. They don’t have time to wait for the stock market to bounce back from a crash.
Long-term investors may choose to invest heavily in stocks and shares. Shares tend to outperform cash over a long time period, although prices are usually more volatile in the short term.
There are a few things to keep in mind when creating a portfolio as each investor is different and has different investing needs. You should think about your tolerance to risk and whether your portfolio is diversified.
Here are some of the things you should consider:
Diversification is when you spread your investment portfolio between lots of different types of stocks and investment assets. For example, you could divide your investment between stocks, bonds, property and commodities.
Diversification is super important because it will lower your investment risk. You’ll be less affected if one company fails or if a particular market sector is performing badly.
It’s also possible to diversify your portfolio within a certain asset class. For example, you could invest 100% in stocks but pick a large range of stocks in different countries and market sectors such as pharmaceuticals, technology and energy.
Not everyone is a thrill-seeker and everyone has a different risk tolerance. But having some risky investments in your portfolio can be a good thing. In general, risky investments have the potential to grow more over time.
Here are some factors to consider when thinking about your attitude to investing risk:
Some investments are more risky than others, but judging the most risky types of investment is difficult as it depends on so many factors. Generally these are considered to be high-risk investments:
The beauty about investment is the amount of choice available. Your investment portfolio will look different to mine and no 2 investment portfolios will be exactly the same.
You can pick investments to suit your circumstances and your attitude to risk and you can shape your investment portfolio to suit your preferences and needs. If you don’t know where to start then take a look at our article on how to pick stocks for beginners.
Starting a stock portfolio is the first step to building your investment wealth. It’s a good idea to sit down and think about your circumstances, when you will need to access your investment and your attitude to risk.
Also consider how you can diversify your portfolio and make sure your investments are spread out across many sectors and geographies. Then it’s time to get down to the fun part: picking your investments.
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