How to build an investment portfolio

I don’t know about you, but when it comes to my finances and long-term goals, there’s nothing better than feeling positive about the road ahead.

So I guess the question for you is, could you be getting more from your money to help you on your journey towards those all-important objectives?

Let’s start with two words ‘investment’ and ‘portfolio’.

At this point you might be thinking ‘an investment portfolio, that’s not for me’. But that’s where you could be wrong – especially when there’s a little expert help involved.

Investment portfolios explained

You probably already have an investment portfolio of sorts without even knowing it. If you store your money as cash in your bank or in a savings account – you might even have a workplace pension as well – that’s your current portfolio. But it may be that you could benefit from a more varied setup.

We always recommend it’s wise to keep at least three months’ salary in savings. But when it comes to your long-term financial goals – and potentially achieving a greater level of growth – it might be worth considering spreading your money around different types of investments, provided you're happy with the risks involved.

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Investing isn’t just about stocks and shares

Don’t worry, I’m not here to overwhelm you with tons of stock market jargon. There’s a lot more to investing than stocks and shares.

Of course, the stock market is an important part of investing. But when you’re looking for growth, throwing all your money into stocks and shares could be unproductive. Instead, there are a range of options you could invest your money into. These are known as asset classes and typically include:

  • Cash – it’s the least risky asset class and tends to deliver lower returns.
  • Fixed income (also known as bonds) – a risk level higher than cash. With bonds, you buy debt from a government or company and they pay you back over a set period with interest.
  • Stocks and shares (also known as equities) – typically the riskiest asset class, as stock markets can be unpredictable.
  • Alternatives – these cover all sorts of different assets, such as property and precious metals like gold.

So how do you decide which asset classes to hold in your portfolio?

The golden rule of diversification

We usually recommend you apply the golden rule of ‘diversification’ to your investment portfolio. Put simply, this means splitting your money across the various asset classes.

It seems simple in principle, but it’s more difficult in practice. One of our financial advisers could help you to understand asset classes and how they perform differently. It’s something they’re highly knowledgeable on and their expertise could come in very handy here.

It’s a balancing act to make stronger financial plans

Of course, you could opt to fly solo when it comes to allocating your money to different assets in a way that suits your needs. But there are a number of important factors to consider. And taking time to talk these through with someone who really knows their stuff could make all the difference in your choices.

One of our advisers could help you to establish:

  • Your reasons behind investing your money. Think future aspirations that are at least five years away. Or you may simply just be looking to get more from your money.
  • The level of risk you’re willing to take on losing money in return for a higher chance of growth in the long run.
  • The amount of time you plan to invest your money for. An adviser will always recommend that you should be prepared to invest for a minimum of five years.

These factors are very important towards establishing your attitude towards risk and the setup of your portfolio. It can prove tricky to achieve the right balance – taking a level of risk you’re comfortable with to help you reach your goals, while at the same time keeping a portfolio which shouldn’t be impacted too much by market falls.

Good advice doesn’t end there

Things change. Life happens. A divorce, an inheritance, helping out loved ones, or a change in income could all have a significant impact on your financial situation.

That’s why it’s good to sit down with an adviser every now and then to talk about your priorities. If things have changed, then your portfolio might need to as well. It may be that you need to reduce the level of risk you’re taking, or you might even be able to increase it. Whichever way it is, one of our advisers could help you keep your portfolio structured in the right way to reach your goals.

Want to start your investment journey today?

Here’s three things you can do right now:

  1. Learn more about investing – view our handy video guide and FAQs
  2. Consider seeking financial advice – learn how we could help you
  3. Take our financial fitness quiz – discover your ‘money personality’ and savings tips to suit you

Our financial advice service could be right for you if you have at least £20,000 to invest or £500 on a monthly basis.

Important information

Stock market based investments are not like Building Society savings accounts. The value of your investments and any income can go down or up and you may get back less than you invest(ed).

Get in touch and get started

For more information on our service and to find out whether you could benefit from financial advice, call our team today.