A portfolio resembles a pie with your financial assets as its filling. Your choice of filling reflects your interests and opens a window to your financial indulgences. In order to build a solid portfolio, you must have a clear idea of what you want your portfolio to look like. Understanding the four elements below will help you in building your portfolio.
1. Set a Goal – Understand that aiming to be rich is not a portfolio goal, rather aiming to generate enough cash flow to sustain your lifestyle, aiming to generate a certain amount of money per month so you can retire at a certain age, and aiming to build a portfolio that can generate a certain volume of money on an annual basis, are all portfolio goals. Setting these goals makes it easier for you to effectively build your portfolio.
2. Age – When building a portfolio, it is imperative to always put your age into consideration. Younger people typically have more time on their hands; hence they can engage in assets with higher risk. Middle Aged people are preoccupied with family obligations and have little free time, hence it’s best they engage in assets with minimal risks. While older people have little time on their hands, so it is preferable they engage in assets that are safe and have preserving value.
3. Risk Aversion – How risk-averse are you? Do you have a risk profile that can sustain high-risk instruments like- forex trading? These are important questions you need to ask yourself. When there is a fluctuation in the value of the asset, the non-risk-averse person will sell it off while the risk-averse person will hold on to it knowing full well the value of the asset will eventually rise again. To find out how risk-averse you are, log on to www.casafina.com.ng/questionaire/, the risk profiling tool there will generate a comprehensive report which will show you the kind of portfolio to build.
4. Knowledge – This is the most important element. Irrespective of your age, your goals, or your level of risk aversion, it is imperative to always educate yourself through books and blogs on topics like personal finance. Having adequate knowledge will help you shorten the time you use to achieve your goals and reduce the possibility of risks.
These are the things to consider while building your investment portfolio.