How to Create an Investment Portfolio Strategy

Famous investor Warren Buffet always advises that you should only invest in what you know.

Many people forget this when they try to diversify a portfolio, losing money on businesses and sectors they don’t understand.

So how do you diversify investment while sticking with what you know?

Luckily, this is possible with some planning. Below, we give our guide to creating a great portfolio strategy.

What Is an Investment Portfolio

An investment portfolio is a collection of assets.

They are very loosely grouped, and the investments in them can differ greatly from person to person.

Considering Risk

All investments have an element of risk about them.

This means that they could make money, but could just as easily lose value.

You have to decide upon the level of risk you are willing to take.

Generally, the higher the level of risk, the quicker and more lucrative the rewards can be.

You need to decide if you are willing to accept these possible losses in return for higher rewards.

Part of this also comes down to the time you have.

On a macro level, do you have time to study and watch the rise and fall of markets?
If not, then short-term riskier gains are unlikely to be easy to spot.

Furthermore, how much time do you have to increase your initial investment?

If you can wait a long time and ride out high and lows, then you can reduce the level of risk involved.

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Type of Investment

The different types of investment you can put in your investment portfolio.

Below are some of the most used types, though it is not an exhaustive list.


Stocks are a purchase of a small percentage in a company.

The aim is to buy stocks that rise in value. You can then sell them later to make a profit.

The caveat is that stocks can go up and down. You may buy shares in a company, and they could lose value.

In some instances, they may just stay at the price you have bought them for.

Stocks themselves come in many different types that you should research when you build an investment portfolio.

You can buy stocks in companies that invest for you, or you can buy them directly via a broker.

They can be bought in everything from technology to retail.

Some stocks may even provide a dividend.

This is a paid share of the company’s profit that is received once a year or every six months.


Bonds are considered to be a very safe investment, more so than stocks.

They are a loan to a company or government, that can be paid back with interest.

The downside is they offer lower returns than stocks.

Bonds are known as fixed-income investments, as you know the final outcome from interest when you buy them.

This makes them a great way to balance out riskier investments.

Mutual Funds

Mutual funds are a less risky investment than stocks, but with many of the benefits.

They are a basket of securities, made from different stocks and bonds.

One piece of investment advice is to use them to diversify your portfolio from the outset.

Mutual funds can be actively or passively managed.

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Actively managed funds tend to have higher fees.

Passively managed ones are known as index funds.

Aggressive to Conservative Portfolios

Balancing your portfolio means deciding if it is aggressive, moderate, or conservative.

Aggressive portfolios tend to rely more on stocks, with more risk but a higher chance of gains.

Conservative portfolios are heavy on bonds with little gain, but lower in risk.

Aggressive portfolios can be around 85% stocks and around 15% bonds.

A conservative portfolio would be around 70% bonds and 30% stocks.

You can head for a middle ground, moderate portfolio that will have 40% bonds and 60% stocks.

Mixing Assets

There are three main ways you can diversify within your stock portfolio.

These are size, sector, and geography.

Firstly, diversify by choosing stocks from companies of varying sizes.

Large, established companies will tend to hold value, be safer, but provide little in the way of gain.

Conversely, investing in smaller, newer companies are riskier but can bring more gain.

Sector is the type of investment and what part of the economy it lies in. Are the stocks you have all technology based, or do they cover commodities and real estate investment as well?

Finally, think about buying stocks from different areas.

By keeping both domestic and international stocks, you can benefit from emerging markets.

This helps safeguard your portfolio, as different countries will have different financial reactions to international events.

Review and Adjust

Once set up, you should keep reviewing and adjusting your portfolio. Start by doing an assessment of the stocks you own.

Look into the company and its performance, then decide if the outlook is good and if you want to sell or hold.

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Bonds can be checked by looking at the credit rating of the bonds you hold.

Your portfolio may have a higher level of risk if your holdings have been downgraded.

If you are considering reinvesting in bonds, then you should also check on the duration.

Bond holding will fall over time, which means they can become less sensitive to rate changes. You can get assistance on all investing from

Getting Help With a Portfolio Strategy

Now you know how to create a portfolio strategy, decide how much help you want.

There are many managed funds, or you can do it all yourself. Lot of guides and websites are online to also help you invest.

Your first top for advice should be our excellent blog.

We have many more guides to help you get the most from your investments in the coming years.




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