Creating a portfolio takes a bit of time and expertise. Depending on the type of portfolio you’re looking for, whether your bullish on the markets, looking to preserve or grow your assets, or you have a certain financial goal you’re trying to achieve, will be important when trying to create the right portfolio for you. Finding the right mix of assets depends a lot upon the state of the markets you’re looking to invest in, your appetite for risk, and your ability to not touch the capital you’re investing. Please keep in mind, this is not investment advice, and if you should seek any, please find a licensed or registered financial professional.

The financial agenda or goal of your portfolio is where we would like to start. Depending on your life circumstances, where you are in life, and what you want to achieve financially, are important factors when it comes to creating a portfolio. If you’re at a point, where you’re looking to conserve and safeguard the assets you have, creating a low-risk portfolio is a good idea. This way, you’re able to know your assets are protected, have limited downside, and hopefully a predictable stream of income as well. The types of assets you choose, have a lot to do with the type of risk you’re able to bear, and the financial plans you have for using the assets you’re investing.

If you’re looking to generate wealth or grow the capital you’re investing, odds are your portfolio is going to be taking a bit of a different approach. A lot of investing and portfolio construction is based on risk versus reward. If you want to have more of a reward, meaning to grow your capital, it’s most likely going to mean taking on more risk. Whether that means new industries, early-stage companies, or higher risk investments, the more risk you bear, the more reward that’s possible.

Within your portfolio, you also have to determine the types of weights you want to give to certain investments. What we mean by that is, diving deeper into your portfolio allocation. The more you like a certain investment or believe in a certain investment to match your goals or your agenda, the more weight it will probably get. Meaning the more capital or more investment you’re going to make in it.

It’s important to keep in mind here, the principle of diversification. Diversification is the principle that protects your portfolio from a substantial decline, because of one poorly performing asset or investment. Diversification is the principle that sits behind the expression, “Don’t put all your eggs in one basket.” By diversifying your portfolio among various investments, asset classes, and markets, you diversify away a portion of risk you’re going to bear. Every investment or asset can only have a limited effect on the overall health of the portfolio. Spreading your wealth and assets across various investments and markets will reduce the weight any one of them can have on the overall well-being of your portfolio’s performance.

Every company, every investment, and every opportunity are different in nature. Certain companies do well and perform better than others, while others see declines, or deterioration in values. A lot of this has to do with the way the company is operating, and the market it is operating in. Having a feel for the direction the company is headed, or the direction the market is heading is ultimately going to have a large impact on your portfolio’s or investments performance.

The markets outlook and future direction is something that’s important to consider when creating a portfolio. You want to put your assets or capital behind markets that are going to grow or remain stable. This way, your capital is protected, and behind proven businesses, with proven business models. If you feel a certain market, a certain company or a certain investment is not going to perform well over the near or distant future, its problem not a good idea to invest your money there. The market forces and company performance are closely tied together, and you want to be in markets or companies that are going to be growing their businesses and their values.

A lot of what financial analysts do, is just that. They analyze various markets, and various companies, to try and figure out how they are going to perform in the future. Whether a stock is over or undervalued. They try to help you analyze or predict the direction a certain market is going to go in, and how a company is performing. From there, its up to you or your advisor to decide what to do, or the angle to take.

It’s important to keep in mind, the types of management, or senior-level leadership in the companies or assets you decide to invest in. It’s a good idea to get a sense of the type of track record, and history the leadership has had. This way, you have an idea of the way they’re going to run things once you decide to invest, and you’ll be better prepared to understand the future direction and trajectory of the company.

Conclusion

Investing and creating a portfolio is almost like an art. The best results are often the ones that put in the most time, energy, and effort. In order to find the companies and assets that are the best value and offer the most in exchange for your capital takes experience and expertise. Depending on the type of financial goals, and the place you’re at financially will play a major role in the way your portfolio is constructed.  The various weights and allocations you make for each investment will be indicative of how much confidence you have in it, the amount of risk you’re willing to bear, and the types of investments or companies you’re looking to invest in.

Every market and the future direction of the market varies on the point of the economic cycle, the stage of business the business is in, and the current state of affairs going on in the economy or in the marketplace its interacting in. Keep in mind, diversification, as this will reduce the amount of exposure and liability one asset or investment can provide to your portfolio, in case of a decline.

Factoring in all of these factors are great ideas when you’re deciding to create your portfolio, and the way in which it will be created. Ultimately, you are going to have a grasp on what you want out of your portfolio, and creating it is going to be a compilation of analyzing these factors and everything else that comes along with investing.