An investment portfolio is the mix of things you invest money in. And it’s usually a mix of things because you don’t want all your money stuck in just one thing. For example, if all you invest in is Snapchat shares, guess what happens to your wealth when Kylie Jenner tweets something bad and 51% of the world decides to use Instagram instead?
But how do you decide what goes into your mix of investments?
I recently ran a survey among readers for what you wanted me to write about next. The winner by far was: “How to build your investment portfolio.” So I know there’s a lot of demand out there for investment knowledge. I know it’s important to you guys, because in today’s day and age — it’s so hard to make good money anymore right?
So let’s get straight to it. In this article we’ll look at some common strategies for building investment portfolios. Finally, as a case study, we’ll look at mine; how I’ve built my investment portfolio over time.
But before we dive into technical “how many percent bonds, how many percent stocks?” questions, let’s first take a step back and talk about why investing can (and should) be vastly different for different people.
Investing is a very personal thing
In an ideal world, we’d all make tons of money from our investments and never lose. The markets would go up forever and we’d sell our RM 58.30 PETRONAS Gas stocks to buy Ferraris.
Alas, the world doesn’t work this way. The markets go up and down, and there’ll always be winners and losers. That’s just capitalism.
But perhaps the more interesting thing is that not everyone wants to drive a Ferrari. Some people would rather go on a food trip to Bangkok. Likewise, most people probably don’t find joy in buying Oil & Gas stocks. Some people would rather invest their money in properties.
So the first thing to understand about investment portfolios is that it’s gonna be different for everyone. Let that message sink in for a while. The 25-year-old management trainee will invest differently from the 40-year-old housewife. And even two 30-year-old accountants might have completely different portfolios.
The great thing is that you get to decide. And you decide based on mainly two things…
Goals and “risk vs reward”
What do you want to achieve by investing your hard-earned money? Or rather, what are your financial goals? For example, common goals for young people are saving for your future child’s education, and funding your retirement.
And depending on your goals, the way you invest will be very different. Planning for three kids who’ll go to international schools is different from planning for a single kid who’ll go to government school. Likewise, planning to retire at 60 in a seaside village is worlds apart from a Jho-Low-style retirement in a yacht off the coast of Bali.