How do I start an investment portfolio?


An investment portfolio can contain various instruments, such as stocks, bonds, ETFs and other securities. At expatwealthatwork, our primary focus is to help you achieve your long-term financial goals by selecting the right asset allocation - or mix of investments - for your portfolio. We do this by helping you choose a portfolio objective.

Before you select one, let's discuss the following:

- Your goals

- How comfortable are you with risk?

- When do you need the money you have invested?

We believe that by understanding what is important to you, we can work together to assess your options and help you select an appropriate portfolio objective.

How much do you need to start an investment portfolio?

You can start building your portfolio with just a few hundred dollars and increase that amount as you earn and save more money.

1. Your Tolerance to Risk

Risk and return go hand in hand, but one key is finding the right balance for you. That's where your risk tolerance comes in, and that's just how you feel about taking investment risk. In general, the more you invest in stocks, the more ups and downs you will experience in your portfolio. But you also increase your potential for a higher long-term return. We want to help you find the right balance between the risk you are willing to accept and the return you expect to receive. Then you are in a better position to stick to your investment strategy no matter what the market is doing.

2. Understand your time horizon

Another important factor to consider is when you need your money. Typically, the longer you can invest, the better you can handle short-term fluctuations in the market, so you can have a larger allocation to stocks, equity funds or exchange-traded funds. However, as you get closer to the money for your goals, we recommend moving to more conservative investments, such as bonds or bond funds. Each of your goals probably has a different time horizon. If your goal is retirement, it depends on when you want to retire. However, if one of your goals is to pay for college, your time horizon will be based on when your kids will start college and how many years of education you plan to pay for. Since each target can have a different time horizon, each target can have its own portfolio objective.

3. Consider the different stages in your life

It is important to understand how your stage of life affects your financial situation. For example, if you are younger and your retirement is still a long way off, your investments will likely look different than if you plan to retire in five years. Below is an overview of portfolio target guidelines where we have identified five investment life stages:

Three "accumulation" phases for investors saving for retirement and two "distribution" phases for retirees.

The Accumulation Years: Because most investors retire over 20 years, these stages are a critical first step in the wealth-building pursuit and are generally defined as follows:

- Early investment years: if you have 26 years or more until you retire

- Good earning years: if you have 16 to 25 years until you retire

- High Income and Savings Years: When You Have 15 Years or Less Until Retirement

The Distribution Years: because your pension can last about as long as your accumulation years, you should consider how your assets will be distributed during the following two phases of retirement:

- Early retirement years: when you can rely on your Investments for your retirement income for 10 years or more

- Late retirement years: if you are 80 years or older and/or expect to enjoy your pension for 10 years or less

Use the overview as a guideline to help you determine your unique portfolio objective. First, find your life stage at the top of the table. Then estimate your risk tolerance using the descriptions on the left. For example, if you are in your early investing years and have a high risk tolerance, a growth focus may be right for you. If you are in your late retirement years and have a low risk tolerance, an income focus may be more appropriate.

The following factors may cause you to adjust your portfolio target from those suggested in the table:

  • Current and future income needs
  • Amount of existing savings
  • Investing time horizon
  • Estate considerations

  • Please note that if you adjust your portfolio objective, it does not mean your risk tolerance has changed.

    4. Find Your Optimal Portfolio Mix

    The right portfolio objective meets the full spectrum of your needs as an investor. There are characteristics and tradeoffs associated with each of these needs, including risks and returns.

    Start with your time horizon and risk tolerance. Next, consider factors such as your income needs, existing savings, and your desire to leave an inheritance.

    Broadly speaking, you can build an investment portfolio that includes elements of income and growth. A growth-oriented portfolio aims to generate capital appreciation, while an income-oriented portfolio will generate stable and regular income. Contact us for more information on specific portfolio objectives: 

    5. Start Building Your Investment Portfolio

    Once you have selected a portfolio objective, we will work with you to build a diversified portfolio of quality investments. This should match your goals, risk tolerance, time horizon, and other important factors. An investment portfolio will generally consist of a mix of investments in asset classes as described below:

    - Cash: The basic level of investing includes funds held in savings and money market accounts for investment purposes, but not cash reserved for emergencies.

    - Income: Investments such as European, US and international bonds pay a fixed or variable amount in interest and usually offer higher rates than cash investments.

    - Growth and Income: European, US and international large-cap stocks and mutual funds offer potential growth through rising income and can generate income through dividends. Prices can vary more from day to day than income investments, but their dividend income typically offers more price stability than is generally found with pure growth investments.

    - Growth: European and US small and mid-cap stocks and mutual funds have the potential to outperform earnings or investments with growth and income. But they typically offer little current dividend income and rely heavily on earnings growth for their long-term returns - and their prices can be more volatile.

    - Aggressive: These investments can offer higher returns, but they also involve higher levels of risk and price volatility. Emerging market stocks, for example, are highly sensitive to a country's political and economic events. And while we don't recommend them, alternative investments also fit into this category.

    6. Contact expatwealthatwork

    We can help you build a customised investment portfolio and understand how each component fits into your retirement and other financial goals, asking questions such as:

    • When do you want to retire?
    • How much money will you need to maintain your current lifestyle?
    • Do you want to leave a financial legacy for your heirs? Buy a vacation home?
    • What else is important to you?

    How can expatwealthatwork help you?

    As the market shifts over time, your investments may not always align with your original investment mix. And your financial goals or current situation may change. Therefore, we will work with you to regularly review your portfolio and make any necessary changes. Talk to us today to start developing a strategy that suits you: