How To Build A Portfolio

CREATIN G A STOCK PGRTFOLIO First time investors are often intimidated by the process of starting their portfolio. It's a common but unnecessary fear that one mistake can lead to a total loss of investments. This does not have to be the case. Installing a set of guidelines can help investors stay on the path to success, even with the occasional and unavoidable missteps along the way. When it comes to picking stocks, nobody is right all the time. Success comes from learning and recognizing patterns, as well as having an eye for quality companies on their way up. THE BASICS TIP #| Here are a few steps to The most consider when approaching important step is to get started. investing: GET YOUR FINANCES IN ORDER Make sure you can handle outstanding debt payments before investing, but it's ok to start with even a small amount. TIP #2 Determine your level of THE BASICS a Learn the essential terminology to investing and gain an risk and build a portfolio that suits your understanding of the basic investment vehicles (stocks, bonds, mutual funds and certificates of deposit). circumstances and timing. SET GOALS O Consider safety of capital, income and capital appreciation as TIP #3 Always remember to take a step back, what's best for you will depend on your age, position in life and circumstances. review your progress and never stop DETERMINE YOUR RISK TOLERANCE learning. This too will vary on age, preference and circumstance but each person must assess their own tolerance. TIP #4 While selecting stocks consider investing in industries that you know already, KNOW THE COSTS $ Different investments bear different fees and costs; know them beforehand. or that you have researched thoroughly. FIND A BROKER Consider reputation & performance along with how much they'll interact with you. TIP #5 Nobody is right all the time, but if CHOOSE YOUR INVESTMENTS F This is when it's time to do your homework. Diversity among asset you're hitting over 50% of the time, classes will spread your risk. you're making money. CONTROL YOUR EMOTIONS Greed and fear can cause investors to act irrationally. Keep it in TIP #6 Selecting stocks and buying at the right time are the most check. critical determinants REVIEW O Always review your performance and look thoroughly at the performance of your portfolio. Review quarterly and annual filings from the companies whose stock you own. of your overall success, a process that entire careers are spent learning. PORTFOLIO BREAKDOWN Determining the level of risk is a major factor in how you will break down your stock portfolio. Based on your current financial situation and how long until you plan to “need" the money you're investing, you can tailor your portfolio with varying degrees of risk to best suit you. These approaches break down the types of stock compositions that fit specific risk levels. RISK-FRIENDLY RISK-TOLERANT RISK-LIMITING APPROACH APPROACH APPROACH For investors seeking long investment horizons (decades) accepting volatility and uncertainty for higher overall A more balanced approach surrenders some of the growth potential of a higher risk portfolio to increase conservatism and predictability. For the slow and steady investor and investors who want to limit short term volatility. returns. %24 50% 65% 75% DOMESTIC DOMESTIC DOMESTIC 50% FOREIGN 35% 25% FOREIGN FOREIGN LARGE-CAP VALUE MID-CAP VALUE SMALL-CAP VALUE LARGE-CAP GROWTH MID-CAP GROWTH SMALL-CAP GROWTH FIXED INCOME 5%- -5% 10%- 10% 15%- 25% 20% 20% 15% 15%- 5%- 10% -10% 15% 15%- 15% 15% 20% 25% E-20% 10% - TIM TIMOTHYSYKES COM Sources: http://www.investopedia.com/slide-show/learn-how-to-invest/ http://www.investopedia.com/financial-edge/o810/portfolio-basics-for-the-beginner-investor.aspx http://www.forbes.com/sites/tomaspray/2012/03/10/building-a-strong-stock-portfolio/ BASICS YOUR INVESTMENT BUDGET %24 YOUR INVESTMENT BUDGET %24 YOUR INVESTMENT BUDGET