A diversified portfolio will ultimately help you reach your investment goals, but exactly how do you get there?
You want to begin building your first stock portfolio and that’s great. We’re excited, and you should be too. But let’s first answer a few (pretty critical) questions.
The first thing to consider when building your portfolio is how much time you have to invest. This will be your investment horizon. The second thing to figure out is how able and how willing you are to take this risk. Before committing, ask yourself: “should the investment fail, which they often do, will it affect my current lifestyle? What about my psychological well-being?” This will determine your risk tolerance.
Once you’ve considered these things, you’ll have a stronger sense of which strategy is best-suited for you. You can then decide if you want to stick all your shiny, pretty gold eggs in one basket (by making an industry specific investment) or if you’re more comfortable spreading those babies thin (with a diversified investment).
There is No One-Size-Fits-All Approach
Different investment strategies work better for different types of people when building a portfolio. Just be sure to keep in mind that with the possibility of greater returns comes greater risk of losses.
To learn more about how to build a portfolio, head over to Wall Street Survivor.