4 Tips to the Best Investment Portfolio

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Building an investment portfolio can be quite a challenge. After all, there is a lot that goes into determining what the right portfolio is for you. What I’ve done below is written out 4 tips that I think will help lead you to the best investment portfolio.

Come Up With Your Goals

Investing relies heavily on determining what your goals are for your money and then sticking to those goals. Consider first what you want to accomplish with your money that you’re using for investment. Once you’ve identified the goal, you can start working towards it. Here are some common goals others have used and then I’ll tell you what my personal goals are.

  • Saving for a major event (wedding, vacation, sweet 16, etc)
  • Investing for children’s college.
  • Saving for a major purchase (car, home, yacht, etc)
  • Investing for retirement

Personally, I am investing in my future and hope to eventually live off of the interest and income generated from my investments.

Determine the Time Horizon of Your Investment

determine time horizonAre you already 63 years old and plan to retire in 2 years? Maybe you’re 23, have a 2-year-old daughter and know that someday you will need to pay for a wedding so you can walk her down the isle. (I have 2 of these.) Whatever your situation in, determining how long your investment is going to work with you will help determine what type of portfolio is right for you. A general rule of thumb is that if your time horizon is long, you can take a little more risk whereas if your time horizon is short, you may want to consider a more conservative portfolio.

How Much Risk Can You Tolerate?

As I mentioned in the last tip, determining how much time you have to invest, may help you determine the answer to this question. With greater risk usually comes greater reward. This is because the market is generally very fair and rewards higher risk with higher reward and lower risk with lower reward.

What are you comfortable with? Once you can answer this, building your portfolio is that much easier.

Seek the Advice of a Professional Consultant

Did you know there are people that have the sole job of helping others manage their wealth and income? They are called Financial Planners and can be invaluable if you need help building a portfolio. Often times, they can be expensive but if you have a lot of wealth to manage, they may save you a lot more than you are spending on their counsel.

hire a professional financial consultant

Managing you wealth can be a very taxing endeavor. The good news is that you don’t have to rush into it. Continue learning on your own and continue following the actionable advice on this website and other websites out there designed to help you better your financial situation. Once you hit a roadblock and think you can benefit from professional advice, look for a financial planner or consultant. Just be mindful of fees and commissions. A consultant with help you develop an investment strategy based on your goals, time horizon and risk tolerance! Funny those are the same three things we already mentioned above.

If you are new investing, and want more information on investing, check out our recent book review on the popular title Stock Investing for Dummies. It’s a good start if you’re interested in stocks. We’ll be reviewing books in other investment fields soon though so stay tuned! Please leave a comment below if you have any questions regarding building a portfolio and where to start.

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12 thoughts on “4 Tips to the Best Investment Portfolio”

  1. Hello Eric,

    I enjoyed reading your 4 Tips to the Best Investment Portfolio. I believe these are very accurate and it all starts with the personal goals. Without goals, we cannot create action steps to achieve them. It takes a long-term plan and ability to commit to it from day one. 

    I have heard of the time horizon and how it affects your ability to take on more risk in the earlier years of the portfolio. I feel like I’m still in those earlier years but I need to be ready to transition to the more conservative after a while. I would really like to get a professional consultant to help if there weren’t too many fees involved. I think that’s part of why I haven’t really worked with one before.

    I’ve always just worked with my 401K manager, but I wouldn’t really call them my financial planner. They are still working for that company, so it’s tough to always know if they really have my well-being in mind or that of their company. I appreciate your advise in these areas and I will take them into consideration.

    The stock market can be a scary place for those who don’t quite know what they are doing. I appreciate you taking the time to point someone like me in the right direction. Thanks again!

    • I’m glad you found value in this article. I plan on posting a lot more that focuses on teaching many of the concepts that I believe are important for beginner and intermediate investors. I also plan on sharing great resources that I believe will help make investing seem much more approachable.

  2. My opinion is to make sure if you are going to invest especially the stock market –do your homework and research first!. I made that mistake about 8 – 10 yrs ago right before the bubble burst almost lost everything. I do still agree however that investing if done smart can be rewarding and can help in retirement. Great article and awesome point you made about seeking professional know how.

    • Great tip! Research anything you are interested in getting involved with especially when it affects money. This website isn’t designed to teach you to be a professional trader. It’s designed to give readers a base line that they can continue to grow with. By setting a foundation of investing knowledge, a house of wealth can be built upon it.

  3. We all know and agree that investing in one’s future is the right thing to do, However Investing requires great discipline and financial understanding especially in times of scarce financial resources.  Only few are able to make this all important decisions that ends up as good Investment

    These tips stated above can be important in guiding ones decision but most importantly caution must be taken as there are so many fraudulent schemes out there.

    • I couldn’t agree more. As long as there are people with money, there are people that look for ways to take that money. Due diligence in anything regarding finances is a must.

  4. I’m glad to have found your site., and I really love this particular post. I’ll be bookmarking this site for regular checkup on your posts. I’ve been worried about investing, my aim  is for my children’s college and to purchase a home. But I don’t know where to start and how to go about it.

    • Those are two very different goals! It is good to see that have your eyes on the future. I would say that investing for college money is more of a long term investment whereas saving for a home would be more of a short term savings fund. 

      The best thing you can do is find a financial planner that is local to you for professional advice. Also, there are a lot of stock brokerages they offer free consultation. My broker is TDAmeritrade and they periodically call to see if I have questions and have a physical branch nearby that I can visit.

  5. Hey Eric,

    Thank you for the great tips and now l more knowledgeable in building my investment portfolio. l am in the midst of forty and planning for my retirement. Do you think investing in Unit Trust is more safer and profitable than stock market in the long term as l am more towards to risk averse?

    Best regards

    NAX

    • Although a unit trust is safer due to being a diversified and and managed fund, I think you’re still better off choosing a diversified ETF which offers the benefits of a  unit trust with significantly less fees. Those fees really take a bit out of your investment over time. 

      With ETF, there are generally no Financial Advisor fees or Performance fees and the Fund Manager fees are smaller as well. This can be the difference of more than 2-3% which compounded can add up quickly.

  6. Thank you so much for this amazing post, it is a very great tool for people who readily want to invest,i will like you to give more insight about determining the time horizons of investment ,This post is very resourceful and I hope it will help me come up and set the right goals. 

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