Is there a better way to build a portfolio?

Simon Brown, Chartered and Certified Financial Planner, explains factors that are important to consider when constructing an investment portfolio?

Becoming a successful investor 5- Is there a better way to build my portfolio?

Simon Brown, Chartered Financial Planner:

There are many ways to build a portfolio. We think it is best to establish a robust and highly diversified portfolio, one that bears the lever of risk that you can tolerate emotionally and financially, and this is likely to deliver returns you need to support the financial goals you want to achieve.

This diagram demonstrates our approach. Careful selection of asset classes is important. A proportion of your money should be held in return enhancers like global equities and properties. Then a proportion of your money should be held in defensive assets that are lower risk like corporate bonds.

It is important for us to understand your tolerance to risk both from an emotional and a financial need point of view. Key questions are: How disciplined will you be when markets go down? How much do you need to invest? And what return do you need to meet your goals?

The goal when we construct the equity orientated mix is to create a highly diversified asset class mix with developed markets at it’s core. It seeks to deliver robust returns in the broad range of future market scenarios. In the uncertain world of investing, the key is to manage the uncertainty as effectively as possible by focusing on taking risks that pay and diversifying broadly.

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