Investment Portfolio: What Is It and Do I Really Need One?

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Many people do not invest due to the notion that the process is overly complex. However, if you want to start building wealth, investing is currently the easiest way to achieve your goal. Another key advantage is, anyone can do it—as long as you’re willing to learn the basic ins and outs of handling your finances.

An investment portfolio is one of the things you may have heard about in connection to investment. Whether or not you’ve already hired a certified financial planner, it’s important to understand what an investment portfolio is so you can decide if you need one or not.

Investment Portfolio: An Overview

An investment portfolio is considered a basket of assets that hold bonds, cash, stocks, and so on. To gain a return, investors combine these securities together in a way that represents their financial goals and risk tolerance.

Your risk tolerance is defined as the amount of variability in investment returns that you can withstand in your financial planning. In a nutshell, it represents how well you, the investor, are willing to stomach all the ups and downs that come with investing. This is what investors refer to as “market volatility.”

Do you think you’ll need your savings in a few years and cannot afford to lose any of it? Then you have a low-risk tolerance—meaning you’ll not likely recover from a serious market downturn.

On the other hand, if you are the type of person who won’t need your money in the next 40 years, then you are more capable of tolerating increased volatility and weathering market ups and downs. This type of investor needs time to wait out a decrease in the investment value before the market reverts back.

Another term to take note of is the “time horizon.” In the investing industry, this is defined as the length of time between now and when you would need your funds.

Do You Need an Investment Portfolio?

Having an investment portfolio is important because it significantly improves your chances of growth and success. Diversification is key for a good investment portfolio. In this tried and tested method, you reduce risk by spreading investments across a wide range of sectors, assets, geographical locations, and companies.

Take note that even when you diversify investments, you still shouldn’t expect to completely avoid financial losses. However, it’s still a crucial strategy in lessening the risk, and usually helps investors reach their financial goals.

Make it a point to spread your investments across different companies and consider investing in businesses that exist in varying sectors. It’s also vital to conduct proper research about any company you plan on investing in before making the leap. Most importantly, we recommend you seek advice from a certified financial planner who can help you come up with a sound, final decision.

Consider Hiring a Certified Financial Planner

Nothing is instant when it comes to the process of wealth-building. Instead, it is achieved through small, informed, and disciplined decisions. The way to success is making wise choices and sticking to the complete financial portfolio. It’s also best to have the assistance of a professional financial advisor.

A certified financial planner evaluates your specific financial needs and guides you with investments, insurance decisions, tax laws, and so on. They help you plan for both short-term and long-term goals, as well as suggest specific investments to match your future plans.

We at Prosperity strive to help our clients invest in their future – and we can do the same for you. Give us a call or send us an email today, and start preparing for your and your family’s future.

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