How to Create an Investment Portfolio and Build Wealth

How to Create an Investment Portfolio and Build Wealth

In today’s financial market individual investors can create investment portfolios with little initial investment. Mutual funds companies and brokerage houses have made initial investing very affordable by requiring little cash outlays to open an account. Investment companies have also created many financial products targeted for individual investors who want to Build Wealth for the long term.

Keep Investment Cost Low

Brokers charge different fees to buy and sell stocks depending on the services offered. The full service brokerage houses may charge larger fees, while many of the discount or online brokers charge lower fees to buy and sell. Keeping investment cost low is important to obtain a better return on a stock position. However, individual investors using discount brokers need to perform a lot of the stock and market research on their own.

Mutual Funds companies offer a diverse pool of funds and each fund has its own expense schedule. These expenses are expressed as a percent of fund balance. It is recommended to stay below 1% for annual fund expenses to keep investing costs lost.

Select a Mix of Growth and Dividend Stocks

Growth stocks are shares of companies that have not matured and are experiencing market growth. Many of the health care and technology company stocks are in the growth category because they may have patent or technologies allowing them to grow for some time. Dividend stocks are generally shares of matured companies that have less growth but offer dividend payments. Examples of dividend shares include traditional companies like Coca Cola, General Electric and Procter and Gamble.

The increases in the share price of growth stock help Build Wealth, while dividend stocks pay steady cash or stock dividends. Reinvesting these gains in the same or different shares also helps to create long term wealth.

Choose Moderate to Conservative Mutual Funds

Large fund companies sell a mix of conservative, moderate and more risky mutual funds. For long term portfolio growth it’s important to select the conservative and moderate funds since these tend to have less fluctuations. Mutual funds come in a variety of sectors including energy, food, financial, precious metals, health care, technology and biotechnology.

Investment risk depends on the sector as well as on the individual companies that make up the mutual fund. Investors should read the fund companies disclosures before buying. These disclosures provide information on fund’s growth, risk and on who should be investing in them.

Review the Investment Portfolio

Brokers and Mutual Fund companies provide daily and monthly account statements to investors. It’s important to review the positions for gains, losses , diversification and to decide if re-balancing is needed. This re-balancing is necessary to avoid big losses and to lock up gains on the portfolio. At this point investors should determine their tolerance level for losses and decide whether to sell or hold particular stock and fund shares.

During times when the investor doesn’t know what to buy next, cash can always be maintained with brokers and mutual fund companies. As an alternative to having the money invested, individuals can keep cash in a sweep or Money Market account temporarily.

Disclaimer: These tips are not substitute for the advice of an experienced financial adviser based on individuals’ situations.

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