When building an investment portfolio, you need to know what your personal goals are. For some, that may mean a portfolio that invests in stocks. But for others, a portfolio that invests in bonds or cash may be the best option. It all depends on how much risk you are comfortable taking and how long you want to invest.
There are many types of investments, and choosing the right ones depends on your risk tolerance, time horizon, and knowledge of investing. The best portfolio is a balanced mix of low-risk and high-risk investments that allows you to have a reasonable amount of income and enjoy a reasonable amount of growth. Using this mix of investment types will ensure your long-term financial security.
Having a long-term goal means you will have time to ride out market fluctuations and take advantage of potential higher returns. You can calculate your risk tolerance with a risk tolerance calculator. Once you know your risk tolerance, you can start building an investment portfolio. If you plan to retire in a few years, for example, then you should invest in mutual funds and stock index funds with a long time horizon.
Creating an investment portfolio that includes a mix of bonds, stocks, and ETFs is the best way to protect your investments from market turmoil. While stocks have a long-term track record, they can also be a risky option. A portfolio that contains more than half of its investment assets in stocks can lose money.