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Top Tips For Setting Up A Great Investment Portfolio For The Future

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If you have never taken the plunge, the thought of investing your hard-earned cash can be more than a little intimidating. You are told time and time again that investments can drop in value just as much as they can increase in value. Who knows if you are going to be one of the lucky or the unlucky ones, or if the scheme is even a real one, to begin with?

Investments, on the other hand, can be fairly simple if carried out correctly and can help to set you up for life. Maybe you are looking for a way to supplement your income while working full-time or something to help you finance your retirement years. Perhaps you would like to leave something for your children to support them in their lives after you have passed away.

Whatever your reason for wanting to start an investment portfolio, we have got some pointers to help you get started building a portfolio that will last you and your family a lifetime.

What do you want to achieve?

Before you do something else, consider what you intend to accomplish with your investment portfolio. Are you looking for capital appreciation, jobs, or a mix of the two? What you want to achieve as a result will influence the type of investment you make.

What sort of risk are you happy to take?

The risk and reward payoff is one of the most important investment concepts. There is never any certainty for any type of investment, so the risk will always be a factor. However, certain types of investments carry more risk than others, so this is something you should remember.

Higher-risk investments, on average, yield a higher return; otherwise, why would anyone take the risk in the first place? However, it is never a given, and it is something for which you must plan. Can you afford to take a loss if things do not go as planned?

Higher-risk investments, on average, yield a higher return; otherwise, why would anyone consider the risk in the first place? However, it is never a given, and it is something for which you must plan. Can you afford to take a loss if things do not go as planned?

Asset allocation

We will go into why diversification is important and how to create a diversified portfolio later, but asset allocation is one of the most important aspects of portfolio construction. Stocks and bonds, land, or something tangible like fine wine, sculpture, or precious metals are all options.

Why should you have a diversified portfolio?

Putting all of your money into a single investment can be insanely risky. If you invest it all in real estate, for example, and the market crashes, your money might as well be wasted. However, if you have some capital invested in real estate, some in bonds, and some in bitcoin, you are not at risk of losing all of your money at once. It quite literally is a case of ‘don’t put your eggs all in one basket’.

After you have decided how to invest your money – for example, in stocks – you can diversify by field. It is okay if you want to invest in bank shares. However, if you invest all of your stock allocations in the banking industry and a financial crisis occurs, such as the one in 2008, the value of your stock will plummet drastically and bang goes your money. 

In this instance, you will want to invest in healthcare, precious metals, technology, and other industries. Then, if one sector fails, it will not affect the entire portfolio.

You should also think about broadening your investments internationally. You are not bound by the stock market of a single country or the economic policies of a single government if you invest in different regions.

Things you could invest in

Property

Property investment has been popular for as long as people have been building houses because it is a low-risk, high-return investment. You can invest in property in a variety of ways, including buying and selling, renting out for residential, commercial, or holiday rentals, or flipping. It does not even have to be permanent houses you can flip; why not take a mobile home flipping course for something a little bit different?

When measured against other types of investments, this one has the advantage of being relatively sustainable. Property sales take time and are still in demand, making them less erratic. You can also leverage your investment, which means you can buy more with less money. In most cases, when buying a home, you put down a deposit, and your bank loans you the rest.

The disadvantage is that it is not quite as liquid. if your money is bound to land, you will not be able to access it at any time. It could take weeks, if not months. It also has high entrance costs, as getting a foot in the door of the real estate market will cost thousands of dollars.

Digital currency

Digital currency is the next big thing in the investment world. It is also known as cryptocurrency, and the most famous and popular one is Bitcoin. Bitcoin has not been around all that long, just over ten years, but the value of it has grown exponentially. In July 2015, one bitcoin was worth under $300. By the end of 2017, it was over $17k. Those who took a chance early on have more than seen a great return on their investment. 

The downside of cryptocurrency is that it is difficult to make long-term predictions on how it will perform because it is so fresh, so the element of risk is large. It can also be turbulent; there have been times when the value has soared to new heights, only to plummet drastically before rising again. Since it is an intangible asset, many potential investors will be concerned.

Stocks

Stocks are one of the most common and widely used investment vehicles. They are plentiful and cheap to the vast majority of people. You can buy them from a stockbroker, a financial advisor, or buy and manage them yourself on the internet. You will profit in one of two ways: as a day trader or as a long-term investor.

Investing in fast-growing companies whose valuation is increasing allows you to buy low and sell big. Day traders aim to profit from short-term trends, while buy-and-hold investors hope to earn a higher return over a longer period. Stocks have the advantage of being extremely liquid; they can be sold quickly and easily, allowing you to access and use your capital.

Stock trading, on the other hand, is fraught with risk. If you have put a lot of money into a business and it does not do well, the value of their stock will fall, and your money goes along with it. There is also the possibility that if the company goes bankrupt, you will be last in line to collect your money as a stockholder.

Gold, silver, and other precious metals

Precious metals such as gold, silver, and platinum, like money, have long been used as a form of investment due to their intrinsic value. Since platinum is such a risky investment, most people prefer to spend their money on gold or silver bullion, which can be assessed in weight, or fine jewelry.

Coins have a high value and can be a valuable collectible. Even in times of economic turmoil, gold continues to hold its value and can be traded in quickly if cash is required.

Art

Art, like stocks and bonds, has the potential to appreciate. The monetary value of an up-and-coming artist’s work would increase if they go on to have a successful career. 

One of the main advantages of art as an asset is that its value does not wax and wane with the stock market. Even if your stocks are not performing well, your art investment could be performing well, which is great news for the smart investor looking to diversify their portfolio and reduce risk. And, in theory, art will continue to appreciate in value over time, but this is not always the case.

Keep in mind that art is a non-liquid or illiquid commodity. This means that converting it into cash is difficult. Consider it like a real estate investment; it’s nice to have, but not necessary. Don’t expect a steady income from your art investment. Remember that the IRS considers art to be a collectible, so any gains will be taxed.

To conclude

What type of investment to choose is determined by many factors, including your risk tolerance, the asset’s liquidity, the entry cost, and the asset’s short and long-term volatility. You should also think about how hands-on you want to be: do you want to buy it and then leave it to make money on its own, or do you want to be involved? It is also important to seek the advice of a professional financial advisor before making any significant decisions regarding your present and future finances.

 

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