6 Steps To Building A Successful Investment Portfolio

http://www.smartfinancialadvice.com.au/where-should-you-invest-your-money/ 6 Steps To Building A Successful Investment Portfolio Investing can be confusing. There is a seemingly endless array of investment options available, and new ones being introduced all the time. So how do you choose what to invest in? And how do you build an effective investment plan to safely and systematically build long-term wealth? Let's have a look at a list of some of the things you can invest in: • Cash in the bank • Government bonds • Overseas bonds • Corporate bonds • Australian shares • Overseas shares • Large cap shares • Growth shares • Income shares • Value shares • Resources shares • Industrial shares • Contracts for difference • Warrants • Options • Exchange traded funds • Listed investment companies • Separately managed accounts • Wrap accounts • Direct shares • Managed funds • Index funds • Active funds • Residential property • Commercial property • Property development • Gold • Silver • Commodities • Wine • Vintage cars • Art • Other collectibles • Forex trading • Share trading • Futures trading And the list just goes on and on and on... With such a long list of different types of investments it can become very confusing. How do you compare them all, research them, analyse them and pick which ones to include as part of your investment portfolio? And how do you get an excellent financial outcome while managing and minimising the level of risk? When we start to look closer at all of the investment options available we can begin to see that there are really four main categories or areas that we can allocate money to when thinking about what investments to purchase. These include: • Cash • Fixed Interest • Property • Shares This makes it a lot easier to start to make some decisions about where to invest, because instead of looking at hundreds of options we can now just focus on these four key areas. What we can then do is decide whether or not we want to include those investment options in our investment portfolio. Do you want to include all four areas or just some of those areas? The next thing to consider is how much you are going to allocate to each area. If you have chosen just one area to invest in this decision is very easy, you allocate all of your money to that investment option. If you are investing in more than one area you can allocate a portion of your money to each of your chosen investment options. Once you've decided which areas you want to invest in and how much you'll allocate to each area you can then think about how you'll invest in each area. There are really only two ways to make money from investing, you either get a return from the income you receive (such as interest, rent or dividends) or you get a return from capital growth (the increase in value of the investment between the time you buy it and the time you sell it). By choosing the type of return you want -- either income or capital growth -- that will guide you towards the specific investments to purchase. For example some shares pay higher dividends than others so if you are including shares in your investment portfolio and you want income from your shares you would be looking for shares that pay a good dividend. So to summarise, the way to simplify your decisions about where to invest is to: 1. Start with a list of all of the available investment options 2. Categorise those into key areas -- cash, fixed interest, property, shares 3. Decide which areas you want to include in your portfolio 4. Work out how much of money you will allocate to each area 5. Choose the type of return you want -- income or capital growth 6. Purchase investments in the areas you have chosen that provide the type of return you want If you'd like to talk to us further about this I'd encourage you to get in contact with us. If you've just got a quick question our contact details are on our website at www.smartfinancialadvice.com.au. If you'd like to discuss your particular situation and financial goals in more detail you can book in for a free 45 minute review session, you can find out more about these review sessions on our website at www.smartfinancialadvice.com.au/review. Disclaimer: This is general information only and does not take into account your objectives, financial situation or needs. Therefore, before relying on this information, you should consider your own personal circumstances and seek professional advice.

Comments

1. great video!!