One of the biggest challenges facing investors is to make a proper distribution of its assets at the time of creating an investment portfolio. The key is to have clear goals and design a strategic plan to achieve them. Thus, it will be much easier to select and diversify assets can compose your portfolio.
Studies show that a balanced portfolio of investments can achieve better results in the long run.
First you should be clear about the goals you want to achieve in the short, medium and long term. The objectives can be various as collect the entry fee for a house, financing the education of your children, or retire earlier.
Once you have clearly defined what you want to achieve is much easier to design a course of action or investment plan to reach the goal.
When setting your goals you should consider
• Current situation: Make an assessment of your current financial situation by specifying your assets, income, and expenses to determine your initial fund and how much you can contribute regularly.
• Time: This involves knowing when you will need the money, and quantity. When your goals are long term, it helps to cope with the volatility of markets.
• Risk tolerance: Every investment has its risk level, and should be comfortable with the degree of uncertainty that will bring constant changes in the value of your investment portfolio.
• Inflation: Inflation causes money to lose value over time; therefore, it is recommended that your income exceeded the inflation rate.
Once you know where you want to go financially, the next step is to design an investment strategy to achieve your goals, it must be based on asset diversification to lessen the impact of market volatility and increase your probablilidades of success.
So, you have to determine what percentage of your portfolio will consist of stocks, bonds, exchange-traded funds, and cash.
You’ll invest in
• Stocks and ETFs if you want to increase your capital and beat inflation
• Bonds to generate income and minimize market risks
• Cash for your needs in the short term and provide stability to your portfolio
It is recommended that both stocks and exchange traded funds are distributed among various sectors in the financial sector, technology, real estate, consumption, etc., so that if a sector is affected, the negative impact on your portfolio will be less. Also, you can distribute between different sizes of companies, and various countries.
And speaking of losses, should also include a strategy to minimize such automatically sell the assets that lose more than 10% of its value, or apply the advantages of options.
Now that you know the strategy that you are as follow you should make an assessment of it. This step is important to take your time and proceed to make the necessary investigations to assess your strategy, verify the likelihood of success, identify problems, and make the necessary adjustments.
You can use various online tools as
Edgar: It is a platform provided by the SEC (Securities and Exchange Commission) that lets you access the latest financial statements of companies listed
Yahoo Finance: Provides financial data and news in real time, as well as having herramnientas that facilitate the selection of actions
Finviz: It has very easy to use tools to filter and financial data are descriptive (sector, capitalization), fundamental and technical (price / earnings, earnings per share), or
InvestorGuide: The interesting thing about this site is that it has tools to help you select actions according to your style or investment strategy
Once you’ve implemented your strategy and set your portfolio you should check or monitor their behavior regularly. This can be done by comparing the current position with the provisions of your plan, and make a rebalance if necessary.
The latter is to return to reallocate your assets according to your initial plan, because with the passage of time will revaluing some assets more than others and this automatically change the original asset allocation in your portfolio.