Investing is a key part of any long-term financial plan. But the right investment strategy can help you get even more out of your savings, while minimizing risk. Here are some tips to help you create an effective portfolio:
Define Your Financial Goals
Defining your investment goals is an important step in the process of creating a sound investment portfolio. Your investment goals will help determine how you decide to invest, as well as what types of investments are right for you.
• Define your time horizon: A good rule of thumb is that if you’re planning on using your money within five years, then stick with safe assets like bonds and cash equivalents.
• Determine your risk tolerance: People who have high tolerance levels for risk are likely better suited to take advantage of growth opportunities offered by equities than those with low tolerances; however, this doesn’t mean that everyone should gamble away their life savings! Be honest about how much volatility can disrupt your daily life or keep you up at night before making any major investments–and remember not all risks are bad ones!
Establish An Investment Plan
One of the keys to creating a great investment portfolio is having an investment plan, according to AG Morgan Financial Advisors. An investment plan is simply a written document that outlines your financial goals, how much you expect to earn from investments and how much risk you are willing to take on in order to achieve those goals.
Creating an investment plan can be as simple as writing down all of the information above on paper or in a spreadsheet program, but it’s important that whatever method you choose allows for easy updating so that changes in life circumstances (such as marriage or divorce) don’t require redoing everything from scratch every time something happens.
Diversify Your Portfolio
AG Morgan Financial Advisors Diversification is the key to investing success. While this is a well-known fact, it’s also one that can be difficult for many people to put into practice. How do you diversify your portfolio?
In order to properly diversify your investment portfolio, you need to look at each of these categories: asset class, geography and style (the way an investment makes money), risk tolerance and time horizon.