Summary
In the long run, investing is a good way to accumulate wealth, but novices often don’t know where to start.
Building a personal investment portfolio is an important step in achieving your financial goals and requires careful planning and consideration of multiple factors, including financial goals and risk tolerance.
In addition, during the process, investors must also regularly monitor and adjust the investment portfolio to ensure that it meets the desired asset allocation.
For a person, an investment portfolio is a collection of all the assets he owns, including stocks, bonds, cryptocurrencies, etc.
In the long run, investing is a good way to accumulate wealth, but novices often don’t know where to start, especially Today’s investment landscape is even more dizzying with the emergence of emerging options such as cryptocurrencies.
Building a personal investment portfolio is a critical step in achieving your financial goals and requires careful planning and consideration of several factors. Let's take a closer look at the key considerations involved in building a personal investment portfolio.
Risk tolerance It refers to the investor's willingness and ability to bear losses. For new investors, assessing risk tolerance considers factors such as end goals, current financial situation, and their understanding of investment products.
The first step investors can take to determine their risk tolerance is to clarify their financial goals. For example, common long-term investment goals include retirement savings and accumulating wealth for future generations, while short-term goals include saving money to buy a car or study for higher education in the near future.
These goals may have a knock-on effect on risk management and tolerance, as financial goals will determine the investment horizon over which they plan (before selling) The length of time the asset is held.
The longer the investment horizon, the more risk investors can take, since long-term gains may offset short-term price declines. If an investor has a shorter investment horizon, such as planning to buy a house within two years, then losing a portion of their capital due to short-term price fluctuations can have a significant impact on achieving their goals.
Having a good understanding of current financial obligations can help determine how much investors can invest without worrying about impacting their ability to pay bills, debts and other necessary expenses.
For example, if a person has a stable income and emergency funds to cover medical expenses, unemployment, or home repairs, then This person may prefer to make riskier investments, such as cryptocurrencies. It is generally recommended that an emergency fund should cover daily expenses and debts for a period of time until a person finds a new job in their industry and profession.
On the other hand, if you haven't started saving for an emergency fund yet, you may want to consider a cash-intensive investment portfolio, in which case. Don’t worry about sudden setbacks that result in having to settle high-risk assets and suffering losses.
Another factor that investors need to consider when making risk tolerance decisions is whether they are knowledgeable and experienced enough with the assets they plan to add to their portfolio, especially when it comes to cryptocurrencies. For example, if they have a good understanding of the crypto market and how crypto wallets work, they may be more willing to take the risks associated with that investment.
However, investors new to cryptocurrencies are better off starting with a smaller amount of money and gaining a better understanding of the market and its volatility. Gradually increase holdings.
Asset allocation It refers to the allocation of funds between different asset classes, such as stocks, bonds, cash and alternative investments such as cryptocurrencies. Intentionally maintaining the right balance when allocating can give investors a better chance of achieving their goals.
Generally, conservative investors may choose to hold more bonds and cash in their portfolios, while investing for the longer term Investors may choose to allow individual stocks and cryptoassets to account for a higher proportion. It should be noted that asset allocation is not a once-and-for-all decision. As investment objectives and risk tolerance change, investors need to make timely adjustments.
For example, if an investor has a large cash reserve, he could allocate 70% of his capital to stocks and 20% to to bonds and 10% to cash. Allocating 70% of his portfolio to stocks seems risky. But if the investor can use 10% of his cash reserves to cover unexpected expenses, he may feel comfortable taking the risk.
On the other hand, people who are approaching retirement may choose to hold more bonds and cash, increasing the size of their investment portfolio. A small percentage is allocated to stocks and cryptocurrencies. If their cash can cover their retirement expenses, they can park a small portion of their money in riskier assets.
A diversified investment portfolio can Giving investors better protection against price declines in individual stocks and cryptocurrencies. Investors may choose to minimize the risk of loss from concentrating their investments in one geography or industry by diversifying their investments across different asset classes, industries and regions.
Investors can diversify by investing in mutual funds or exchange-traded funds (ETFs). But please note that diversification does not guarantee a profit or protect against loss in an overall declining market, and while it is a good strategy, it is not without risks.
Mutual funds and exchange-traded funds may be more suitable for investors who want to be "hands-off managers" and want to diversify their investments because they are certified Financial institutions carefully select the stocks and stock portfolios included in these funds. S&P 500 index funds and FTSE 100 index funds are prime examples of offering a "hands-off" approach. Investors can invest a portion of their salary each month in purchasing these products.
If investors prefer self-selected investments for diversification, there are a variety of investment products to choose from, including individual stocks and bonds. and cryptocurrencies. But it’s crucial to do thorough research and understand the risks and potential rewards of each investment, and tools like Morningstar, Bloomberg, and CoinMarketCap are all great options.
Build a personal investment Combination is never a one-and-done thing. It can be an ongoing process that requires regular monitoring and adjustments. Investors may need to rebalance their portfolios periodically to maintain a desired asset allocation.
Investors may also need to adjust their investment portfolio if their investment objectives or risk tolerance change. Assume an investor has a diversified portfolio consisting of 60% stocks, 30% bonds, and 10% cash. If its financial situation becomes better, it may have a higher risk tolerance and be willing to take additional risks in investments and pursue higher returns. Assuming that investors have done their own research, they may adjust their portfolio to reduce the proportion of cash and increase the proportion of Bitcoin. By increasing their Bitcoin holdings, investors increase the likelihood of higher returns, while taking on a correspondingly higher level of risk.
The reverse is also true, rebalancing a portfolio may also involve abandoning riskier assets and switching to more conservative options. For example, investors approaching retirement may abandon some riskier investments and instead hold primarily bonds and cash.
It is important to note that adjusting a portfolio based on risk tolerance is an entirely personal decision and investors should consider it carefully and always work with Align financial goals and investment strategies. Also review and rebalance your portfolio regularly as you get closer to your goals.
Building a personal investment portfolio is a complex process that requires time, patience, and an honest look at one's current and projected financial situation. There’s also no one-size-fits-all approach to building a portfolio.
When researching assets suitable for holding, new investors need to always pay attention to their risk tolerance and avoid those Financial management experts who sell specific financial management or investment portfolios and claim to achieve ultra-high returns with ultra-low risks. Building a portfolio takes time, but in the process, novice investors can gradually build confidence in their investment management abilities and gain greater control over their investment decisions.
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