When I started in the investment industry, I asked myself more than once: how do I set up my investment portfolio? This concern is common among those who want to enter the world of finance or are just starting out in it. If this is your case, don’t worry!
In this article, we will explain, from a practical perspective, how to set up an investment portfolio correctly, understanding that potential returns, capital protection against market volatility and the achievement of your financial goals depend on it.
Why is it important to configure my investment portfolio?
Indexed investment portfolios are financial instruments that group a selection of assets with the objective of maximizing returns through diversification. This strategy not only seeks to increase returns, but also to reduce risk by avoiding concentrating the investment in a single asset. It is useful both for seeking long-term returns and for preserving capital, especially in contexts where the priority is security and stability.
To set up my investment portfolio, I understood that it is the collection of all the assets I own, and that its structure must be aligned with my financial goals and risk tolerance. Every investor has different goals and risk levels, so the portfolio organization must be tailored to those personal characteristics.
Diversification is a key strategy in portfolio management. It consists of distributing capital among a variety of financial assets, such as stocks, bonds, mutual funds, currencies and other instruments. The rationale behind this practice is that assets do not react in the same way to market conditions, which helps mitigate risks.
If my portfolio is well configured, it can align with my financial objectives, manage risk effectively and optimize return opportunities, which will improve my long-term results.
How to set up my investment portfolio? Step by step
Once I understood the role of my investment portfolio in my financial strategies, the next step was to configure it. To achieve this, I considered several aspects, such as those mentioned below:
Risk profile and objectives
As a pre-investment phase, it is essential to evaluate and understand the risk profile. This profile reflects the investor’s capacity to assume fluctuations in the value of his investments and is characterized by personal factors, such as age, income, loss tolerance and investment level, among others. It is therefore vital for selecting the best assets to invest in.
Risk profiles can be classified as conservative (low risk and lower returns), moderate (balance between risk and return) and aggressive (higher risk to seek higher returns). By knowing your risk profile, you can determine which asset classes best align with your expectations and how to diversify your portfolio effectively.
Simultaneously, you need to establish your financial objectives or define what you are looking for with your investment: are you looking for passive income, savings for the future or gains through a more speculative investment? The objectives define the type of assets and the time horizon of the investment, which directly impacts the composition of the portfolio.
Time horizon and liquidity
The next step in setting up my investment portfolio was to establish the time horizon. This refers to the period over which I plan to hold my assets before I need them.
Depending on whether the goal is short-term (less than 3 years), medium-term (3-10 years) or long-term (more than 10 years), the investment strategy will vary. Shorter horizons require more stable and liquid assets, while longer horizons allow for greater risk-taking in search of higher returns.
Asset liquidity is equally important: it is the ease with which an asset can be converted into cash without significantly affecting its value. Liquid assets, such as government bonds or large company stocks, offer greater flexibility, while less liquid assets, such as real estate or small company stocks, may present greater difficulties in selling.
Diversification and balance
Diversification consists of distributing capital among different asset classes and sectors, with the objective of reducing exposure to the risk of a single asset or sector. Through this strategy, the portfolio becomes more resilient to market fluctuations. The key is to maintain an appropriate balance: when some assets grow in value, the composition of the portfolio can become unbalanced, which can increase risk without the investor wanting it. Regular rebalancing helps adjust the portfolio so that it is always aligned with the risk profile and objectives.
Expenses, taxes, and management
In the process of setting up my investment portfolio, it was critical to consider the costs associated with managing the portfolio, which include asset purchase and sale commissions, fund management fees and other administrative expenses.
In addition, the tax burden on capital gains, dividends, and interest can significantly reduce net returns. Therefore, considering taxes and, if possible, taking advantage of tax incentives is essential to optimize returns.
Ongoing management is another key aspect: monitoring and adjusting the portfolio on a regular basis ensures that it is always aligned with the investor’s objectives. Market fluctuations, changes in economic conditions and asset behavior require regular adjustments to maintain the desired risk profile.
Knowledge and preparation
It is essential that the investor is educated about the characteristics of different assets (stocks, bonds, mutual funds, among others) and how they behave in various market conditions. This preparation allows making informed decisions and to configure an investment strategy appropriate to one’s objectives and personal profile.
Selection of financial products
The selection of financial products was the last step in the configuration of my investment portfolio. For this, it is necessary to choose the specific instruments or vehicles in which to invest, according to the investor’s risk profile, objectives and time horizon. This is a fundamental step, as it determines the composition of the portfolio, evaluating the characteristics of the products, their historical returns, associated costs and specific risks.
Optimizing the investment portfolio: Is it necessary?
After setting up my investment portfolio, the next phase is optimization. As an investor, it is important to conduct periodic reviews to assess whether the asset allocation is still appropriate according to the risk profile, time horizon and financial objectives set. This process allows you to detect potential misalignment and adapt to market changes.
Market movements can cause fluctuations in the value of assets, which can unbalance the portfolio and increase risk more than expected. Therefore, it is crucial to identify the aspects that are not working and make the necessary adjustments to keep the strategy aligned with the objectives.
In my case, to manage this process, I opted for a roboadvisor, a platform that automates and customizes investment management efficiently and easily. These technologies allow investors to define a strategy adapted to their needs and risk tolerance in an agile and comfortable way, offering a professional approach without complications.
Configuring your investment portfolio with inbestMe
Among the automated investment alternatives, inbestMe stands out as an ideal option for those who want to create and manage their investment portfolio in a simple and efficient way. With intuitive and personalized tools, it allows users to open an account and answer a short series of questions. This initial questionnaire allows the platform to learn about their investment profile, establishing their risk tolerance and financial objectives.
Once you have defined your investor profile, you can move forward and set up your account. To do this, the inbestMe team has developed a robust algorithm that suggests investment options tailored to your goals and profile, helping you choose the strategy that best suits your needs.
Get started today and do it with the help of specialists. This is a process that requires careful planning and consideration. In my experience, when setting up my account, the platform was very supportive and provided a smooth and hassle-free experience.
