25/06/24
An investment portfolio is a strategy for maintaining and growing wealth over time. Your goals could be short or long-term and there are several factors that will determine the right approach and asset allocation for you.
This article looks at ways to build and manage an investment portfolio that aligns with your current circumstances while working towards the financial future you want to achieve.
What is an investment portfolio?
An investment portfolio is a term for a collection of financial assets (asset classes) that hold value. These could be stocks and shares; bonds; commodities such as gold, oil, or wine; property; and even crypto currency.
Different asset classes offer varying means of realising a return on your investment. While shareholders who own a portion of a company can trade it on the stock exchange to make a profit, those with bonds as part of their portfolio can expect to receive a fixed income from their investments.
The most crucial consideration in the early stages is the degree to which you want to invest. While investment portfolios are a useful tool for strategic wealth management, any investment carries a degree of risk. Because of this, it’s advisable to only ever invest what you’re comfortable losing.
For this reason, we recommend seeking guidance from a qualified, Independent Financial Adviser (IFA) before committing funds for investment. The professionals at CTT Private Client can help.
Determine your financial goals
Having established available funds for investment, the next step is to determine your financial goals. A one-to-one with a member of our expert Financial Advice team will help you decide the best mix of asset allocation for your portfolio based on your timeframe and risk tolerances.
You may have a relatively short timeframe in mind – a 5 to 10-year plan to fund your children or grandchildren’s education, for example. On the other hand, you may be looking to create an investment portfolio to support your own long-term retirement goals, which could be 20 years or more in the future.
High or low risk?
The timeframe you’re working to, along with your own personal tolerance levels, will help you decide on the level of risk you’re comfortable with when choosing how and when to invest.
Financial markets can fluctuate dramatically – anywhere from +25% to –25% is not unusual, markets dropped to an all-time low closer to –40% during the 2008 financial crisis!
A diverse, higher-risk portfolio will generally recover from short-term losses over time. If you’re building your portfolio as a long-term investment plan, incorporating some higher-volatility investments such as stocks will afford you the potential for a greater return in the future.
Property is another long-term asset class with the potential to yield significant return over several years. It’s higher risk, because it’s harder to liquidise real estate quickly should you need to access the funds. However, building a buy-to-let property portfolio that generates income as well as a means of long-term investment can provide the best of both worlds.
If your appetite for risk is low or you’re working to a tighter timeframe, investing in low-risk asset classes, such as Government Bonds, may suit you better. It’s important to iterate that no investment is risk-free and there is still the potential to lose some or all of your capital.
Building a robust portfolio
The principle of building a robust portfolio is largely based on achieving diversity across your assets.
A diverse portfolio of investments incorporates various asset classes from different sectors and markets. It’s deemed lower risk as it theoretically has a better chance of weathering market downturns while offering greater potential of a healthy return overall.
Managing your portfolio with CTT
Once you’ve established your portfolio, you’ll need to maintain it. The best way to do this is with the help of an Independent Financial Adviser. At CTT Private Client, we recommend investors re-evaluate their portfolio every 6-12 months depending on asset allocation.
We look at each of your investments, the current market, trends, and its projections, to ensure your portfolio continues to perform while meeting your current financial needs and future objectives.
We offer advice on ways to maintain the balance of asset value across your various chosen classes to maximise the diversity of your portfolio and minimise undue risk. We’ll also help you stay abreast of any further investment opportunities that would complement your portfolio, so you can continue to build on your financial plan.
In conclusion
Investment portfolios aren’t for everyone. It requires a degree of nerve and commitment to stand by and watch the value of your assets rise and fall – sometimes on a daily basis.
If you have the capital and the confidence, however, creating a diverse portfolio of investments can be a rewarding way to make your finances work for you.
With the insight of our dedicated IFAs, we’ll help you build a portfolio that’s tailored to your current circumstances while meeting your objectives and future financial goals.
Contact CTT Private Client to find out more about our personal financial planning services.
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