When it comes to investment success, one of the most important factors is to build a portfolio that will deliver. There are tens of thousands of different options to choose from, from equities to options to futures to forex. These individual investments are important, but they mean nothing unless your portfolio as a whole is cohesive, balanced, and diverse.
If you want to achieve market success, here are three important questions to ask yourself when you start investing.
Why Am I Investing?
Your portfolio has to function as a many-headed beast, and in order to ensure that it performs as efficiently as possible, you need an overarching goal or set of goals to work towards. These need to be detailed enough to help guide your investment decisions, determining the type of assets you invest in, how much you put into different markets, how long you invest for, and the amount of risk you’re willing to accept.
The best way to develop this theme is to start with one central goal. Think of something that you really want to work towards, whether this is saving for your retirement, building a mortgage deposit fund, or making enough to send your children to university without having to rely on student loans. This aim needs to inform every decision that you make. It’s okay to add additional goals as you go along, but make sure that they’re always compatible with this initial aim; one of the easiest ways to destroy a portfolio is to have too many diverse goals.
Which Investing Platform Would Be the Most Efficient?
There are lots of different platforms to invest through, and their specific form and functions will be heavily influenced by the broker and package you choose. If you’re planning to rely heavily on professionals for advice, then your platform is less important as you’ll be influenced by your support team. If you’re planning to do most of it yourself, then your decision becomes much more important.
One of the first things to think about is how diverse your portfolio will be. If the answer is ‘very’, then you need a platform that will allow you to trade many different markets from the same place, like the SMART WebTrader offered by Sucden Financial. This will help to keep your strategy neat, streamlined and efficient. If it will be more focused on one area of investing, on the other hand, then you should probably look for a specialist in that particular field.
How am I Going to Spread My Risk?
The amount of risk you’re willing to shoulder will depend upon your personality, strategy, and long-term goals, but it’s always important to make sure that you have some back up if things go awry. This is almost impossible to achieve when your assets are all centred in the same part of the market, as any drops will cause significant problems. The best way to protect yourself, therefore, is through diversification. Try to ensure that your risk is spread across different sectors and types of asset, so that you’re able to experience volatility without suffering disastrous losses, but still benefit from the good times too.
Follow these top tips today and your portfolio should thrive.