Skip to content
× FreshBooks App Logo
Official App
Free - Google Play
Get it
You're currently on our US site. Select your regional site here:
4 Min. Read

How to Start an Investment Portfolio? Beginner’s Guide

How to Start an Investment Portfolio? Beginner's Guide

Starting an investment portfolio often proves challenging, especially for beginners. This is made even more difficult when you’re in the middle of trying to pay off student loan debt. Therefore, it’s important to consider your investment goals and risk tolerance as you build your portfolio.

That’s where we come in. Our beginner’s guide will show you how to craft an investment strategy from the ground up. So even if you have little to no experience with investments or portfolios, you’ve come to the right place.

Here’s What We’ll Cover:

Where Is Your Money Going?

Key Takeaways

Where Is Your Money Going?

First things first. Before you can start your investment portfolio, you need to determine your asset allocation. Many beginners utilize what’s known as the 60/40 portfolio. This just means 60% of your assets goes to individual stock investments, while 40% goes to lower-risk bonds.

It’s an easy way to get started, and you can always make adjustments later if you feel it’s necessary. Of course, you may want your allocation to be much different. After all, it’s your money. And if you’re in debt or you have a limited budget, you may have no choice but to start out small.

Even if you’re young, you are putting your various types of assets at risk any time you deal with stocks. This is true whether you are dealing with your savings account or money market funds. And due to that fact, you want to be careful with your investments. That said, seasoned investors with substantial income or high job security can afford a greater risk level.

But even if you are young and have a stable job, it is often difficult to deal with instability, or volatility. In this case, it may be better if you have less equity exposure. Or, at the very least, amass defensive stocks for your portfolio.

Invest in 401(k) or Similar

Savings plans that are employer-sponsored are often excellent options, where you can gain exposure in stocks and bonds. Many employers match employee contributions (to a percentage), allowing you to get a head-start on your investments. After all, employer-sponsored plans are essentially free money in your pocket.

Consider an IRA or Brokerage Account

Maybe your 401(k) reached its max, and you have some extra cash leftover that you’d like to invest. An IRA or brokerage account is another great place to invest. There, you’ll find more investment opportunities compared to a 401(k) plan.

What’s more, many experienced investors are keen on the taxable brokerage treatments that these types of accounts have. A Roth IRA, for example, has tax-free growth. And when this money comes out for a retirement plan, it’s tax-free then, as well.

Use a Robo-Advisor

Robo-advisors use advanced algorithms to determine the best use of your assets. Think of a robo-advisor as your AI investment advisor. There are many robo financial advisor options to choose from, each with its strengths and weaknesses. But one thing they have in common is that they are ideal for beginner investors who are putting together an investment plan.

That’s because robo-advisors make your investment decisions for you. Some have more options and flexibility than others. So it’s up to you to decide how much control you want. Keep in mind that even the robo-advisors with more options are still limited compared to a human advisor. The same is true for their investment advice.

Where robo-advisors can’t compete with face-to-face advice is volatility in market performance. A human advisor can tell you whether you should continue with your investment or look elsewhere. Robo-advisors, as slick as their AI is, can’t tell you want to withdraw or keep at it.

Key Takeaways

As you build your investment portfolio, it’s important to remember that any investments come with a level of risk. Any time you’re dealing with the stock market, there is a risk of loss. You need to think about your risk capacity and what you can afford to lose. That’s why it’s so important to have a savings goal and don’t allow yourself to go below it.

Of course, the opposite is true, as well, and you could see a substantial profit. But don’t expect to see any right away. Patience is key and is all a part of getting into investing. For more advice, head on over to our ResourceHub.