How Portfolios Help Investors Reach Their Goals
Investing can be very difficult, especially when you’re just starting out. Before you consider investing, you must have a plan. You must know what you would like to obtain (a home, college education, or a retirement income) and have a time frame as to when you want to accomplish this. A portfolio will help you do just that and most every investor has one.
Defining a Portfolio
What is a portfolio? It can be defined as the entire collection of all your investments. Whether you have a combination of stocks and bonds from 30 different companies or you only have 10 shares of stock from one business, every type of investment you have, combined, acts as your portfolio.
The term, portfolio, is meant to resemble a collection of information about your investment activities and your goals. Rather than being a visual object you can see and touch, it acts more like a picture of where you are now. This helps you determine where you would like to be in a matter of years. If you seek investment advice from a professional, as a broker, your portfolio will act as a picture as a means of steering you in the right direction.
What Portfolios Contain
To be most effective, your portfolio is best when kept in the form of a book. This book may be as basic or as detailed as you desire. The more information it has, the more it will help you when making future decisions. Portfolios can contain other forms of information as:
- Your tolerance towards risk
- Types of investments that are most appropriate for you
- A journal of investment activities
- An investment schedule of payments to contribute
- Past performance of your investment
There is no limit to what information your portfolio can contain providing it is all relevant to investing. Not only does your portfolio keep you organized, but furnishes information you can refer back to again and again. It may also serve as a reminder to analyze and maintain your activities on a regular basis. Investing without a portfolio is much like driving without a road map or even a destination in mind.
If you have a clear picture of what you would like to accomplish during your investment years, building a portfolio will help keep you on track. If you’re not sure, there are numerous resources both online and off that specialize in helping investors build portfolios.