RDFS - Investing for the long run

How to Create a Portfolio for the Long Run

The concept of investing is no longer just for the wealthy; nearly everyone has one form or another of investments tucked away somewhere. Even some newborns come into this world with investments!

Just as there is no age limit to investing, there is no limit to how long you can hold your investment. Some investors hold for decades, reaping multiple profits. But it is not all about having a long-term investment portfolio; there is a method to investing. It is important to be strategic in your choice of investment portfolios. Everyone has a risk tolerance and it is important to choose an investment portfolio that conforms with your risk principles. A healthy long-term investment portfolio includes adapting your investment approach to the changing dynamics of the financial market and your lifestyle. 

Tips for Creating a Long-term Investment Portfolio 

When it comes to having an investment portfolio, it is important to have a plan that helps you make the right decisions. This will ensure a healthy investment portfolio which suits your risk tolerance and financial goals. If you are looking to grow your wealth over a 20 to 25 year span, you here are some tips to consider – but don’t forget that you should look to the right advisor. If you don’t currently have an advisor, here is a great article to help you choose the right advisor for you.

1. Find The Appropriate Asset Allocation

At this stage, you should review your current financial situation to determine how you want to spread out your investment portfolio. Working with your advisor, you have to consider your age, the amount of capital you want to invest, and your risk tolerance. Your risk teolerance is important because at some point you will likely incur a loss. Some investors panic at the sight of even a small loss, while others may choose to hold in hopes or achieving long-term gains. You should always consider your current expenses and financial situation as you do not want to invest all of your money and be left with insufficient capital to meet your regular financial obligations. 

2. Structure Your Investment Portfolio

After determining how you want to allocate your investment portfolio, the next thing to do is to determine how much goes into each portfolio. This is where you determine how much goes into bonds, stocks, and even highly volatile investments like cryptocurrencies. You can also go further by further dividing your portfolio allocations.

For example, if you have an equity portfolio, you may decide to spread it across different industries to minimize your risks. You can also spread your bond portfolio into short-term bonds and long-term bonds. 

This exercise is highly dependent on your risk tolerance, and really should be done with the guidance of your financal advisor.

3. Monitor and Review

After successfully structuring your investment portfolios, you need to keep an eye on them to make adjustments when and where necessary. Long-term investments cannot simply be abandoned until you are ready to cash out: they should be reviewed at least once a year with your advisor. Analyze your positions from time to time and rebalance them where necessary. Today’s financial markets can be turbulent, which could make your initial trading positions change. Your current financial needs may also require you to change your position. If you have extra cash to invest, you may want to pump in more money and if you need cash, you may want to access profits accrued to date. 

4. Strategic Rebalancing

After reviewing your portfolio, any rebalancing needs to be strategic.  This is where the right advisor comes in; a knowledgeable advisor will ensure that your portfolio is balanced in a way that will meet both your current and future needs.

Does this seem overwhelming? Don’t worry – you can always contact us for a free review of your investments.