Top 4 steps to a well-composed portfolio

A well-defined portfolio structure is crucial for its success. How to approach the composition of the portfolio? In four easy steps!

Set an investment goal!

Consider what your purpose is to save or invest. What do you save for, how much money do you need and when do you need it. In doing so, you must take into account the level of risk that is still acceptable to you. Here, keep in mind that the longer the savings period, the more risk you can afford. And vice versa, of course.

The core of the portfolio should consist of three core funds!

According to your investment goal, choose a maximum of three funds in which to invest 70% to 80% of all assets. The good core of your portfolio is represented by funds that are most likely to achieve constant returns. These are global equity or global bond funds that invest in developed markets. When you deposit fresh funds into a portfolio, you are contributing to funds that you already have in your portfolio, while maintaining the ratio between them.

Spice up your portfolio with sector or geographically limited funds

In addition to a foundation that provides a constant return, any successfully set portfolio also needs investments that will bring you above-average returns. But be careful! Sector or geographically limited funds do bring higher returns, but they also pose a higher risk to your portfolio! Therefore, limit the number of funds you will invest, for example, in a fund that invests in precious metals, energy, or emerging markets.

Alternative investments - never more than 10% of the value of the entire portfolio!

Investments such as real estate, ownership of precious metals, IPOs, and the like are, for the most part, much less dependent on the movement of global capital markets compared to traditional investments such as stocks, bonds, and mutual funds. Like other types of investments, alternatives have their advantages and disadvantages, with the key disadvantage being poorer liquidity. Therefore, it makes sense to allocate only those funds for alternative investments that you do not need in the short term.

The portfolio needs to be monitored!

Even a well-defined portfolio will not bear the desired results if you do not follow the movements of selected investments! However, since a daily review of exchange rates and monitoring of news that affect the behavior of capital markets takes a lot of time, I recommend that you leave the care of your portfolio to experts.

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