Investing is a great way to utilize your money so you can put it to work for you and start on a path to achieving whatever financial or life goal you may have. For investors of all experience levels, building an efficient portfolio is often the key to mitigating risk and promoting the chance for higher returns. When starting to build your investment portfolio, there are a number of things to consider and keep in mind.
Determine Your Goals
Before investing in anything, it is important for investors to consider what they hope to accomplish with their investments. Some investors hope their investments will provide income while others are looking for capital appreciation or preservation of capital with the potential for higher returns. In order to achieve desired levels of success with your investments, you must first determine what you hope to accomplish and build out your portfolio accordingly. The timeframe for any particular goal is the most important input in designing your portfolio.
Diversify Your Asset Allocation
A diversified portfolio is often considered one of the best tools for minimizing risk and achieving more stability and security with investments. Once you have identified your investing goals, choosing investments from various asset classes and industries will give your portfolio more diversity which should lead to greater stability, especially in the wake of a recession. If one company goes bankrupt or an asset class underperforms, for example, it is far better to have invested in multiple other assets rather than just that one company or sector alone. Diversification can help distribute risk across all assets without reducing the potential for higher long-term returns.
Invest in Retirement Accounts
As you build your portfolio, one asset to take advantage of is a retirement account like a 401(k)/403b, Roth IRA or Traditional IRA. Maximizing the most you can contribute to any of these vehicles is an excellent way to secure a financially-stable future. Focus specifically on a 401k/403b if your employer offers one and matches your contributions.
Be cost conscious
For those who are new to investing, consulting with a Robo-advisory firm may be a solid option as well. These automated programs assess investor goals and utilize investments that could best suit that investor’s goals and risk tolerance. Robo-advisors can also help investors to rebalance their investments automatically which keeps an investor’s asset allocation on track and matched to their goals, risk tolerance and time frame. As your assets grow and your needs get more complex, it is at that time that you can seek out and work with a Financial Advisor.
In this day and age, anyone can build an investment portfolio. Conducting research, assessing your goals, and making use of the tools and resources available to you will help you build an effective portfolio that suits your goals and your aspirations.
Securities and Investment Advisory Services offered through Essex Financial Services, Inc., a Registered Investment Advisor, Member FINRA, SIPC. A subsidiary of Essex Savings Bank. The securities and insurance products offered through Essex Financial Services, Inc. are not a deposit of, or other obligation of, or guaranteed by any bank, or an affiliate of any bank, are not insured by the FDIC or any other agency of the United States, the Bank or an affiliate of the bank and involve investment risk, including the possibility of a loss of the principal amount invested.