How to Develop Your Own Investment Portfolio

Having your  own investment portfolio is very important.  A good mixture of equities, fix income securities, life insurance, and cash-on-hand are fundamentals of portfolio management.  But sad truth is, very few people knows how to build their own investment portfolio.

Let me walk you thru this:

Investment houses such banks, mutual fund companies, and insurance firms have their own fund managers.

Fund managers or portfolio managers primary role is to manage funds trusted to their company and make it profitable thru investing in various markets.  Take a note of make it profitable.

You can be a fund manager of your own investment.  In this case, you can only blame yourself if your decisions don’t meet expected result.

How to build your own portfolio?

Defining your Risk Appetite

Defining the level of your risk tolerance is very fundamental in building your own portfolio.  Other people wanted to be conservative in their investment and don’t want to risk their money in speculative market, therefore their risk tolerance is low.  This investor classified as “conservative“.

Others wanted to absorb some little risks, having placed in both securities and equities.  Mixture of investments.  This investor classified as “moderately conservative“.

There are investors who wanted to grow their money in short time as possible, and they believe in having a long term investment brings most sustainable growth of their money, placing most of their funds in equities than in securities.  This investor classified as “aggressive“.

These are among classifications of risk appetite.  Tolerance in risk widely affects age, financial sources, and time.

I can say, the more younger you are, the more risks you can absorb and manage.  The older you are, less risk tolerance you will be.

Making Yourself Liquid

There is no rule or golden policy in your financial life that should define your investment portfolio.  It all depends in you.

Only best practice.

That best practice is being liquid.

Companies have their own treasury group, that manage funds and balance their balance sheets in order to define if the company is  financially healthy or not.  Their primary job is to keep their balance sheet in balanced.

Being liquid simply you have enough available funds or cash in any situations.  If your funds are allotted in long term investments, and suddenly one of your children needed medical attention; and you need funds.  You will incur losses if you decided to terminate your long term investments.

Better to prepare enough cash or funds in any situation.

The Art of Allocating Investments

As I said, there is no ruling in allocating your investments.  It varies on your age, financial goal, income capacity, and credit standing.

Let me share you ours:

In my age of early 30s, me and my wife already designed our investment portfolio to achieve our financial goals.  Here are our allocation:

Equities (Stocks, Mutual Funds, UITF)  …………………………………………………………………. 50%
VUL (Investment allocated in 100% equities
with insurance attached)……………………………………………………………………………………….. 35%
Cash on Hand (Savings Deposits)…………………………………………………………………………….15%

Currently, we are increasing our cash-on-hand since we have enough funds allocated in long term investments.  When our cash-on-hand is enough, we can allocate in medium to long term funds such Money Market funds.

I hope this article help you in building your investment portfolio.

 

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Eleison Cruz

Financial Consultant. Personal Finance and Investment advocate. Author of The Good Asset, a blog that educates people in investments, financial literacy, and life insurance. Visit www.thegoodasset.ph

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