The topic of forming and managing an investment portfolio in recent years is gaining more and more popularity. The economic crisis has passed, people began to accumulate savings. Someone was luckier, and the inheritance of the money. How to manage your deferred money? Where to invest and not burn out? What are investments and how to use them correctly? What does an investment portfolio look like and what are its varieties? What needs to be done to form a portfolio of investment projects?
What is an investment?
Investor behavior is associatively reminiscent of a coach. If we consider financial investments as players, the task of the investor is to correctly position each member of the team on the field. Depending on the talents and strengths, the players benefit the team and lead to victory. Properly selected investments, well-selected financial strategies and products are valuable players who can win the match. If one member of the team is disabled, the rest of the team is able to fight for victory.
Investments in the classical sense are the financial investments of the client. Where a person invests his money is his purely personal affair. In general, increasing capital through financial instruments is an investment.
Investment portfolio
Creating a permanent source of passive income is the task of the investor. Passive income is the money that comes through the “work” of savings (interest, insurance payments, dividends, etc.). An investment portfolio in the financial environment is usually called a client’s asset package, which in a certain way combines various sources of passive income. The way in which the types of securities and other sources of income are distributed in percentage terms is decided by the client himself.
An experienced investor is looking for the most effective way to manage assets. It would seem that investing in the most profitable business is simple. But this strategy is attractive only for beginners. With experience, understanding comes that the main principle of forming an optimal investment portfolio is carefully calculated risks. As a rule, the maximum interest on investments is promised where there is a high risk of loss of investments.
An experienced investor does not seek to buy securities with the highest income. The main goal of his investments is minimal risks and maximum income. The principle of forming an investment portfolio is the liquidity of funds, the ability to withdraw your own money from circulation at any time, without the risk of losing it.
If you use one source of income, there is a high risk of not being able to get money back at any convenient time. As a rule, highly profitable investment projects do not provide such an opportunity until the end of the term.
For the safety of investments, it is recommended to use several financial instruments for capital formation.
The risks
It is impossible to completely exclude them in the investment process. Causes of risks:
- Incorrectly selected companies for investment. The investor chose the business that will not generate income (new or in crisis), violated the principle of forming an investment portfolio.
- Inflation. The depreciation of cash as a percentage exceeds the return on assets. It is required to take this point into account when choosing a strategy.
- To succumb to spontaneous impulses. Experienced investors know that there is no need to sell assets if everyone sells. The same goes for shopping.
Varieties of briefcases
There is no clear definition of portfolio classes. This is due to the fact that asset management is a purely individual matter. Therefore, often investors mix different strategies to achieve maximum results. Each novice investor needs information on the principles of forming an investment portfolio and their main varieties.
Income type of portfolio
From the name it is clear that the emphasis in investment strategies is on maximizing profits. The risk should be minimal. Investors with such a portfolio invest in shares of large state-owned companies. In the long run, they bring the owner from 10 to 25 percent of passive income. The disadvantage of such a portfolio: a wide time frame. The calculation is for a long-term relationship.
Risk portfolio
The investor is ready to risk his own capital to achieve maximum profit. Invested in stocks of the latest corporations, fast-growing companies, modern developments. There is a high probability of capital loss if stocks lose value.
For growth
Income is growing by increasing the value of purchased securities. The principle of forming an investment portfolio for its owner is as follows: he buys shares of actively developing companies that use the latest technology. After rising stock prices, the owner sells them. Additional capital is formed from the difference in price. The risk for such a portfolio is high, therefore it is used mainly by experienced investors.
Balanced
The principle of forming an optimal investment portfolio is the preservation of capital. The owner buys the securities of verified companies. Profit from them does not come very quickly, but there is no risk for the loss of capital. Plus a stable income, albeit not quite high.
Short-term paper
High-risk portfolio. The investment portfolio of securities is formed with the participation of the owner in operations with maximum liquidity. A quick refund is also important. The instrument of this portfolio are foreign exchange transactions, stock speculation.
Long term paper
Most well-known billionaires publicly declare that this method of capital accumulation is the most reliable. Finances are invested in companies that generate stable income. At the same time, profitability will become tangible in 10 years or more. Such a portfolio is suitable for those who do not need an urgent withdrawal of funds in the coming years.
Stages of forming an investment portfolio
Before deciding on the start of investment activity, it is necessary to take into account some points:
- You should not have debts. First, pay off all loans and give out debts to friends. No “anchors” that can pull you back from a bright investment future.
- You can’t invest last money. In an emergency, they may be needed, and assets will have to be withdrawn. Then the whole plan for capital formation will go down the drain.
- Organize a financial airbag. It consists of four, and preferably six monthly expenses. This money should be freely available. For example, you can store them on a debit card at interest or place on a short-term deposit. You can use the funds only in an emergency (job change, illness, unplanned expenses, etc.).
- Choose a broker. A broker is a company through which money is deposited into an individual investment account and withdrawn from there. If there are no problems with putting money into the account, withdrawing it from there can be problematic, but if you have an unreliable broker. There should not be any additional illegal conditions (for example, bring a friend into the program). Read the contract carefully.
- Learn. Investing requires constant updating of knowledge. Communicate with experienced investors, it is useful to attend business training on investment. They will provide a wealth of information about the principles and stages of forming an investment portfolio. Find your source of material, one with which it is convenient and easy to learn new knowledge.
And now the moment has come when you are ready to invest. You can start with any amount. It is possible to supplement the account later, when the experience in capital turnover comes.
Target Orientation
The first step in forming an optimal investment portfolio is the right goal. The vague motivation to “make money if you succeed” is not the goal. The end result is determined by numbers. Understand what you want: to increase capital by 100% or save up for an initial payment for a mortgage (in total). The specific, tangible and interesting goal for an investor to form an investment portfolio is the most important thing in business. Having in mind a clear vision of the result of his labors, the investor will not risklessly risk capital.
There is no place for impulsive decisions in his strategy. The absence of unjustified risk gives confidence that there will be no new mistakes and disappointments in investments. You can resort to the help of a financial adviser at first. You need to understand that quickly earn a high income does not work right away, you need a basic level of knowledge of the investment system. After gaining initial experience, you can try to carry out risky operations.
Investing strategy
The second stage in the formation of the investment portfolio of securities is the correctly selected filling of the portfolio. Of those that were discussed above, an experienced investor makes a mix to his taste. The choice consists essentially of three standard strategies: aggressive, passive or moderate.
Aggressive strategy implies high risks with the possibility of obtaining maximum income in a short time. Constant involvement in the process and understanding of what is happening is required. Continuous purchase and sale of assets, reinvestment. Such a strategy requires the owner of the account knowledge, time and a sufficient amount of money, the risk should be justified.
With a passive strategy, accumulation is much slower. Investments are made exclusively in reputable companies. Cash on average more than ten years are in the account. As a result, they will bring a stable high income.
A moderate strategy implies the most reasonable and interesting approach: dividing assets into several parts as a percentage. Where one part is spent on long-term projects, with the help of another, various securities are bought out, the third is placed on deposit, the fourth is invested in life insurance and so on. This strategy protects the investor from all sides. It is possible to save the bulk of the capital in case of an unsuccessful investment.
And guaranteed income from each source of accommodation. The risk of losses in this case is minimal. The bulk of the capital will be preserved in any case. It must be remembered that it is not necessary to split the capital into many parts, 8–9 is enough. Otherwise, it is difficult to keep track of all parts, and the risks of losses increase.
Market analysis
This is the third stage in the formation of a financial investment portfolio. Get acquainted with the practice of experienced investors, practice on a virtual account. Choose a reliable broker, study the exchange, try to repeat the actions of successful investors, which allow newcomers to watch them. Training and practicing on small amounts will form an invaluable experience for larger investments.
Assets
The fourth of the stages of forming an investment portfolio. This way to increase capital is good because you yourself can manage assets. The owner himself decides what and how much to buy and when to sell, where he will invest, and where not. Therefore, all risks are individually accountable; there is no effect of roulette or other gambling. Choose a business for investment that you know a little about. Undistributed funds are recommended to be exchanged for currency, if there are no options where they can be determined.
Monitoring
Even if it is decided to use the most passive source of income, the strategy is conservative and the profit is not expected very soon, periodically go to the stock exchange and watch what happens there. You may need to buy something or reallocate assets. Do not let things slip. Investments require due attention.
How to choose a broker?
There are rules for selecting a reliable broker so that an unexpected unpleasant situation does not occur when withdrawing funds. Here is what you can focus on:
- Availability of a license. You can verify the accuracy on the website of the Central Bank of the Russian Federation.
- Availability of access to the markets you need (foreign exchange transactions in foreign markets, the market of precious metals, etc., depending on requirements).
- It is recommended to choose a broker from the leaders. Such companies have state support. TOP-10: BCS, Finam, Renaissance, Otkritie, VTB, Sberbank, Alfa-Bank, Promsvyazbank, IT Invest, Kit Finance.
- Pay attention to the rates of the broker. Depending on the investment strategy, some of them may not work.
- Ability to use convenient software.
- Check out the additional services that the broker provides. Ability to use the services of a financial consultant, model portfolios, etc.
Guided by these simple rules when choosing a broker, you will save time and be able to start investing faster. Not forgetting about the principles and stages of forming an investment portfolio.
Optimization
The first tool is portfolio diversification. Its essence boils down to the distribution of assets as follows: 50-70% of all finance goes to the long term, 20% to highly profitable, but risky companies. The balance is transferred to the deposit account or exchanged for metal. You need to maintain harmony within the portfolio and not invest in one segment.
The second method is the distribution of finances among banks in deposit accounts. If the amount is more than 1.4 million, then it is not worth storing this money in one bank, since the insured amount will increase. There are ready-made banking offers for investments, which can be used as an alternative to a deposit. In this case, the client chooses the area in which he will invest.
The third is the purchase of real estate. Particularly in demand are projects at the stage of excavation or construction. The return on such investments is 30-70% of the total transaction with the sale after completion of construction.
Finally
What gives an investor to form an optimal investment portfolio? The article made detailed recommendations. The main thing is the security of capital. Using a combined portfolio brings predictable income, the ability to flexibly manage cash assets. Portfolio liquidity allows you to quickly buy and sell securities. The income received can be reinvested and use the fruits of investments for many years to come.