I want to build a portfolio where do I start?

Steve Weisner - Independent Financial Adviser Radcliffe & Newlands

Building a portfolio might sound confusing but what do you need to consider before starting?

Portfolio is the term for a range of investments which is owned by a single person or organisation. It is generally spread across a variety of assets, including shares, bonds, property and cash, the allocation of which has been determined in relation to that investor's objectives. Ultimately, a portfolio’s success is dependent on its performance – but one investor’s idea is never the same as the next. Your attitude to risk is highly personal and the solution you choose must reflect that.

Risk is key to helping determine which asset classes you select, and in what proportion. For example, cash is virtually risk free and the interest that it earns provides you with a regular income. However, because there is no risk attached, the income payments are generally quite low and change in line with Bank of England base rates. There is also zero opportunity for capital growth and over time the effect of inflation can erode the value. At the other end of the scale we have equities, ie: shares which allows you to participate in company profits. Equities generally offer greater long term income and capital growth opportunities as a successful company will increase not only dividends but also reinvest in itself, increasing its value. However, unlike cash, equity prices are highly volatile as they react to changes in market sentiment. In addition, if things go wrong for a company, you may end up getting back less than you originally invested.

Making this decision, ie: how much of your portfolio goes into each asset class, is known as asset allocation. Combined together, asset classes can actually complement each other, helping to smooth out some of the peaks and troughs of investment performance. Perhaps surprisingly, different asset classes tend to perform in different ways, and this lack of correlation between them means that one will often compensate when another is having a difficult time.

A good portfolio should generate the maximum possible return for you for your given level of risk. Of course, you should always remember that investment is for the long term and performance is not guaranteed. Indeed, you may not get back what you invested, particularly if you withdraw after only a couple of years. However, if you have allocated your portfolio in the right way, you are in a much better position to maximise your opportunity and lower your long term risk.

Portfolio building is a specialist subject that needs regular monitoring. Contact Steve at Radcliffe and Newlands and he'll be happy sit down and discuss all your investment needs. 

Steve Weisner
Independent Financial Adviser
Radcliffe & Newlands
5th Floor Crystal Gate
28-30 Worship Street
London
EC2A 2AH  

Tel: 020 7382 0437
Fax: 0207 374 0462
Email: SWeisner@myeggnest.com
www.rad-new.com

If you have a question or if you would like to discuss becoming a client with Radcliffe & Newlands then do please complete the very short form on the right hand column of this page.

You will usually get an answer within 24 hours except during the weekend or bank holidays.

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