Build Your Portfolio Wisely

When you first start building a portfolio many considerations are probably running through your mind. Even if you've had your portfolio for some time, you may be re-evaluating your past purchasing decisions. But have you covered all your bases? Your first consideration when evaluating your position is defining your objectives. Each individual has unique investment objectives based on your age, financial capacity, employment situation, etc. For example a young college student, a retiree, and a parent of five children in school all have different investment objectives. A great outline of what to consider when building a portfolio may be helpful and below you'll find just that.


Income. Everyone would like to maximize their current investment income. Stocks with high dividends and bonds will compose an income centered portfolio. Generally utility stocks and blue-chip stocks tend to pay high dividends. So if your goal is to obtain a higher income generating portfolio, a focus on bonds and high dividend yielding stocks will be a main focus.

Growth. When investors want their portfolios to grow in value at a rate equal to or surpassing the rate of the market average, a portfolio will comprise mainly of growth investments. Generally, investors aiming for growth tend to be either younger with many years to make up any loss that might occur or risk takers as growth portfolios tend to encompass a higher degree of risk than other types of portfolios. Technology stocks are classified as growth stocks because most technology companies will reinvest dividends into the growth of the company; this is generally due to the type of industry. Technology companies need to stay competitive in their respective market, therefor reinvesting profits is a must.

Risk Averse. Investors less interested in a certain defined payoff tend to be risk averse. An investor with limited funds for investment or nearing retirement might be risk averse and therefor be more inclined to safeguarding their principal investment. Investors with this mindset might focus their portfolio on blue-chips stocks. Blue-chip stocks tend to be defensive stocks because they provide products or services that are essential to daily living and therefore are somewhat resistant to economic downturns. A traditional element of a risk averse portfolio is diversification.

Liquidity. Investors interested in a liquid portfolio are interested in turning a portfolio into cash at a moments notice. A portfolio aimed at liquidity may comprise money market, CD's, or savings.

Speculative. Investors that are speculative in nature tend to demand the greatest potential gain. Young investors with limited financial responsibilities, or sophisticated traders with the ability make up any losses that might occur tend to be speculative. An example of a speculative investment is an options trade.


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