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How to build an investment portfolio

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Successful investing means aiming for both short-term and long-term financial goals. But build a investment portfolio achieving both types of goals can be a difficult task.

Whether you’re working with a financial advisor or taking a do-it-yourself approach, the following six-step checklist can help you create and maintain an investment portfolio for all of your goals.

What is an investment portfolio?

An investment portfolio is a collection of assets that you buy or deposit money into to generate income or capital appreciation.

Assets include cash on deposit in a money market account or certificates of deposit, real estate, or anything you can buy with a brokerage account—stocks, exchange-traded funds, mutual funds, bonds, crypto and more.

Investment portfolios may involve one or more account types. For example, your employer 401(k) plan is a type. But as you add other goals, like saving for a mortgage down payment or for college, you’ll likely add more investment accounts to your portfolio. Your complete portfolio may include a high-yield savings account and a 529 plan.

It’s important to consider how each type of investment account works separately and in conjunction with each other. Don’t put all your eggs in one basket because without realizing it, you could end up investing in the same assets in multiple accounts. As you are about to discover, not all investments are suitable for all goals or investors.

How to Build an Investment Portfolio in Six Steps

Building an investment portfolio can be broken down into the following simple steps. Each step prepares you for the success of the next step. Ultimately, you’ll have a better chance of building a portfolio that matches your investment style and the goals you want to achieve.

1. Start with your goals and time horizon

When building an investment portfolio, the first step is to make a list of your financial goals.

“Without an end goal, it doesn’t really matter why you want to invest,” says Brian Robinson, a certified financial planner (PSC) in Sharpepoint.

Once you’ve set your goals, sort them by time horizon, which is nothing more than how long you’ll need to hold the investments until you need the money.

  • Short term goals are the ones you will need the money for within 12 months.
  • Medium-term objectives take between one and five years to complete.
  • Long term goals take more than five years to achieve.

For example, if you are saving for retirement in 30 years but need to buy a new car this year, you have a long-term goal and a short-term goal.

2. Understand your risk tolerance

Now that you know when you need money for each goal, you can decide your risk tolerance, i.e. how much you are willing to lose in the short term to achieve each goal.

“The longer the time horizon, the more aggressive you can be,” says Denis Poljak, CFP at Poljak Group Wealth Management, because you have more time to recoup short-term losses. He says short-term goals generally require a more conservative strategy since you probably can’t afford to lose what you’ve saved up.

Risk tolerance goes hand in hand with time horizon. For example, if you assume too little risk when you’re saving for your retirement in 30 years, you might not reach your savings goal. But if you are five years away from retirement, assume too much risk could mean losing money without being able to make up for the losses.

Your risk tolerance is ultimately a balance between what is needed to achieve your goals and how comfortable you are with market fluctuations.

3. Match your account type with your goals

Before choosing investments, you need a place to put them. That’s why you want to build an investment portfolio using an account that matches your investment goals.

  • Tax-advantaged accounts like IRAs and 401(k)s work best for long-term retirement-related goals and can accommodate any level of risk tolerance.
  • Taxable online brokerage accounts work well for medium to long term goals where you want more upside potential than a low risk deposit account.
  • Deposit accounts like CDs, money market accounts, and high-yield savings accounts work best for short-term goals where you want a little growth but can’t afford to lose money.

4. Select investments

Now is the time to leverage your goals, time horizon and risk tolerance when selecting investments to achieve your goals.


Shares, also called shares, are shares of ownership in a publicly traded company. You can buy shares of thousands of companies based in the United States and abroad. They tend to be a higher risk investment, but also offer a greater chance of growth in value than bonds or cash alternatives.


Obligations turn investors into lenders. Purchasing a bond allows you to lend money to a business, entity or municipality. In exchange, the bond issuer pays you interest on your loan until it pays it off in full. Bonds are generally less risky than stocks, but there are also higher risk bonds like junk bonds.


If you can’t afford to buy a single bond or stock, or just want to spread your risk across multiple stocks and bonds, you can invest using exchange traded funds (ETF) and mutual funds.

These investments are baskets of securities. When you buy stocks, you own a bit of everything in the basket. Your risk will vary depending on the type of fund.

Alternative investments

If you can dream it, you can invest in it. From precious metals like silver and gold to real estate, cryptocurrencies, hedge funds, and even commodities like wheat, there are ways to invest beyond stocks and bonds to diversify. your wallet. Alternative investments are often riskier than stocks and bonds.

Cash and Cash Alternatives

Investments such as CDs, savings accounts and money market funds offer low-risk ways to put money aside while earning a (very) modest rate of return.

5. Create your asset allocation and diversify

Once you’ve decided on the types of investments you want in your investment portfolio, it’s time to decide how much of each you should buy. While you might be tempted to throw every penny you have into stocks to maximize returns, Robinson advises her clients to think differently.

“Making money is good, but how much haven’t you lost on the way down? ” he says.

Asset allocation prevents you from putting all your eggs in one basket and instead helps you allocate your money to enjoy capital appreciation while limiting losses. For example, if you have a high risk tolerance and a 30-year time horizon, you might allocate 90% to stocks and 10% to bonds. A person with a moderate tolerance for risk might choose a portfolio composed of 60% stocks and 40% bonds.

Once you have decided on the asset allocation, you can diversify your investments within these asset classes. For example, you can split your 90% allocation stocks between large and mid-cap stocks and then diversify stocks across multiple sectors such as healthcare, industrials and technology.

To help you get started, you can check out popular asset allocation models to help you identify your ideal portfolio.

6. Monitor, rebalance and adjust

Once you hit “buy”, your investment portfolio still needs ongoing care and attention. This is why it is important to regularly monitor and adjust your portfolio.

For example, you can check your portfolio twice a year to make sure your asset allocation is still aligned with your goals. You may need to rebalance your holdings if the market has been volatile. If you invest through a robo-advisormany take care of the rebalancing for you.

You may also need to adjust your investment strategy as life changes. Getting married or divorced, becoming a parent, receiving an inheritance or approaching retirement are all life events that may require you to rethink your current investment strategy. The best investment portfolios grow and thrive like houseplants, with regular care, attention and nurturing along the way.

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