Found Portfolio

What to consider when creating a portfolio

Define goal

It must be formulated clearly and with a clear expectation of results. For example, buying an apartment for a certain amount, a safety net for children’s education.

Investment terms

The more time, the larger part of the portfolio can be invested in equity funds. For short-term investments - up to three years - it is better to keep most of your money in bonds.

Selecting the risk level

The more tolerant you are of price fluctuations and the risk of losing money, the larger the proportion of stocks you can have in your investment portfolio.

Risks for investors

If you are not ready to see a drop in the value of your portfolio by more than 5-10%, then it is better for you to choose reliable bonds on the stock exchange. If you are confident that you can withstand a serious decline in the value of your portfolio during a crisis, for example by 40-50%, you can invest most of your portfolio in stocks.

Let's say you've thought it over and decided that you're ready to invest for 10 years to save up a large sum. In this case, you can divide the portfolio in half: half into stocks, half into bonds.

Mistakes of novice investors

Failure to understand a clearly defined goal is a guarantee of possible financial losses. Successful work in the securities market requires a calm mind, but constant changes in quotes can confuse an investor and force him to take rash steps.

Missing target

Diversification involves having a portfolio of assets that differ from each other by class, currency and issuer country. Investing a significant amount of money in one type of asset or one company can cause the entire portfolio to lose money.

Ignoring diversification

One of the key criteria for choosing securities is the company's financial performance. Purchasing assets solely because of personal bias towards a particular company can be dangerous and lead to serious financial losses.

Careless selection of assets

The idea of increasing your income in a short time may seem attractive. However, it is important to remember that speculation is different from investing, and over the short term it is almost impossible to predict movements in market prices.

Speculation

Rebalancing: Adjusting a Portfolio for Changing Environments

No portfolio, no matter how successful, remains unchanged over time. The market is constantly changing: companies go through periods of prosperity and crisis, change owners, make mergers and acquisitions, sometimes go bankrupt or restructure - their securities are subject to fluctuations in prices and profitability.

To ensure your investment portfolio continues to protect your savings and provide income, regular reviews, adjustments and changes to your asset mix are necessary.

Reasons for Portfolio Rebalancing

Change in portfolio structure

The price of some assets rises while the price of other assets falls. This leads to changes in portfolio composition and asset structure due to market volatility. This may also lead to changes in the share of shares in the portfolio and the currency structure.

Changes in external conditions

The external situation may become more unstable, which leads to increased fluctuations in the market and the emergence of crises. To effectively respond to changes in the external environment, it is necessary to apply strategic management of the investment portfolio.

Changes in issuer indicators

The main reason for carrying out the rebalancing procedure is a change in the basic financial indicators of the issuing companies. This analysis can be carried out after the publication of reports, emergencies or the appearance of negative/positive news.

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