Building an Investment Portfolio

Building an Investment Portfolio

Learning the ins and outs of the financial world and your personality as an investor, takes time and patience. Below we provide tips on how to build investment strategies to reach your goals.

  1. Getting Started in Investing

Being a successful investor is a journey, not a one-time event. Before you begin your investment journey you must define your destination. You must ask yourself when are you looking to retire and at what age? How much money will you need to do this? You must ask yourself these questions as they define the goals of your investment journey.

  1. Research the Market

Taking time to understand modern financial concepts and strategies helps to develop your understanding of the financial markets and economic activity around the globe, enabling you to be a smarter investor. Investing is a combination of financial fundamentals and various qualitative factors. The scientific aspect of finance is a solid place to start and should not be ignored. By researching what works in the market, this can open up strategies that may work for you. For example, Warren Buffett’s investment style is summed up in this well-known quote: “If I cannot understand it, I will not invest in it.” Emphasizing that researching the market before you invest is extremely important.

  1. Determine What Investment Strategy Works for You

Nobody knows your situation better than you do. Working with your adviser to construct your investment strategy will allow you to reach your goals and objectives tailored to your personality profile. One technique to aid you in understanding yourself was developed by fund managers Tom Bailard, Larry Biehl and Ron Kaiser – The Behavioral Model.

This model classifies investors according to two personality characteristics: the method in which you act and the level of confidence you enact those methods. Based on these personality traits this model divides investors into five groups.

  • Individualist – careful and confident, often takes a do-it-yourself approach
  • Adventurer – volatile, entrepreneurial and strong-willed
  • Celebrity – follower of the latest investment fads
  • Guardian – highly risk averse, wealth preserver
  • Straight Arrow – shares the characteristics of all the above equally

Each of these personality traits can be successful investors. It is first categorising yourself and planning your investment strategies and goals around these personality traits that make for a successful investor.

  1. Know Your Investment Friends

Your trusted advisers are able to draw from a large resource pool of data for investment information. It is important that you are honest with yourself, identify and amend the factors that may be preventing you from investing successfully. Collaborating with your team of advisers allows you to make sure you approach every new investment with a neutral point of view and be subjective with your research.

  1. Find the Right Investing Path

Most successful investors start off with low-risk diversified portfolios and gradually learn as they go. As you gain knowledge and understanding over time, you will become more comfortable to handle a much more active stance within your portfolio. If you put all of your eggs into one proverbial basket you must watch said basket extremely carefully. Having said that combining both of these strategies by making tactical bets on a core passive portfolio. Bear in mind that when you start out in the investing world you must be prepared to be in it for the long run. Don’t expect an immediate pay out and instant gratification. Sticking with a long-term strategy may not be the most exciting investment choice, however, chances of success are much higher. The market can be extremely volatile and hard to predict, it is important to continue learning and keep your mind open. The investment journey has an extreme learning curve, don’t let this frustrate you. Acknowledge and learn from your mistakes.


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