Successful investing takes a lot of patience and research. You'll get different advice from everyone you ask about which stocks to pick, but one thing you will hear from almost everyone who knows anything is to create a diversified portfolio. It's the proverbial eggs in one basket problem -- you could lose all of them, or in this case, all of your money. Spreading your investments across different stocks reduces the risk of disaster and increases the chances you will net better returns.
Define your goals. Before making any moves, determine what you want out of a portfolio. Make a list of all the facets of your investment goals. For example, for how long do you want to invest? How much money can you invest, and how much money do you want to make? Different answers to these questions should dictate the type of portfolio you create and how you should allocate your funds.
Develop a strategy. Now that you have your goals, set up a plan to meet them. Divide up your funds into different categories so that together they can meet your goals. For example, if you are aiming for high short-term returns, put a sizable percentage of your assets into high-growth stocks. If you want a slower-paced, high-value portfolio, allocate more funds into solid, blue-chip companies.
Assess your current holdings. If you already own stock, check what you've got. It may be a random list of stocks, so evaluate their efficacy in helping you meet your goals. Although it makes sense to buy stocks based on performance and value, you are more likely to achieve investment success in the long run if you tailor your portfolio to meet your needs rather than buying haphazardly. Perhaps you will find that you have already allocated money into an array of stocks that meet your objectives.
Re-balance your current mix. If you find your money is not invested in a balanced way or that your present holdings don't meet the goals you've clarified, shift your mix to work within your framework. You may decide to sell off some stocks that just don't fit into the right pattern. Perhaps you have money in three different, large financial companies, which isn't a very diversified portfolio. Better to sell some and invest in another type of industry, or a different category such as small cap or aggressive growth.
Create a game plan. Where are you going from here? Check out suitable stocks and thoroughly research their financials. You can easily get information on stocks through websites such as Bloomberg. Carefully choose stocks that fit your goals and your strategy and show high performance. Decide how much you are going to invest every month and stick to this budget. Continue to allocate new funds into the framework that you have developed.
Monitor your investments and tweak as necessary. Always check up on your stocks and sell when you need to. As you trade, make sure to fit any new purchases into your framework to keep your portfolio in tip top shape.
- Consider a mutual that fits into your goals.
- Get advice from a financial planner to help you allocate properly.
- Don't jump into any purchases; make planned decisions.
- Hemera Technologies/PhotoObjects.net/Getty Images
- How to Divide a Portfolio Between Stocks & Bonds
- How do I Make a Stock Portfolio?
- What Kind of Stock Portfolio Should You Open for Children?
- How to Measure Idiosyncratic Risk in a Stock Portfolio
- How to Detect Stock Price Movement
- How to Calculate the Average Return on a Portfolio of Stocks
- How to Maintain Your Own Stock Portfolio
- How to Hedge a Stock Portfolio Against a Crash
- How to Calculate a Stock Portfolio Yield
- What Happens to Dividends in a Stock Portfolio?