{"id":35879,"date":"2018-10-03T11:26:06","date_gmt":"2018-10-03T03:26:06","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=35879"},"modified":"2018-10-03T11:26:06","modified_gmt":"2018-10-03T03:26:06","slug":"build-investment-portfolio","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/build-investment-portfolio","title":{"rendered":"How To Build Your Investment Portfolio (And How I Built Mine)"},"content":{"rendered":"

An investment portfolio is the mix of things you invest money in. And it\u2019s usually a mix of things because you don\u2019t want all your money stuck in just one thing. For example, if all you invest in is Snapchat shares, guess what happens to your wealth when Kylie Jenner<\/a> tweets something bad and 51% of the world decides to use Instagram instead?<\/p>\n

But how do you decide what goes into your mix of investments?<\/p>\n

I recently ran a survey among readers for what you wanted me to write about next. The winner by far was: \u201cHow to build your investment portfolio.\u201d So I know there\u2019s a lot of demand out there for investment knowledge. I know it\u2019s important to you guys, because in today\u2019s day and age \u2014 it\u2019s so hard to make good money anymore right?<\/p>\n

So let\u2019s get straight to it. In this article we\u2019ll look at some common strategies for building investment portfolios. Finally, as a case study, we\u2019ll look at mine; how I\u2019ve built my investment portfolio over time.<\/p>\n

But before we dive into technical \u201chow many percent bonds, how many percent stocks?\u201d questions, let\u2019s first take a step back and talk about why investing can (and should) be vastly different for different people.<\/p>\n

<\/span>Investing is a very personal thing<\/span><\/h2>\n

In an ideal world, we\u2019d all make tons of money from our investments and never lose. The markets would go up forever and we\u2019d sell our RM 58.30 PETRONAS Gas stocks to buy Ferraris.<\/p>\n

Alas, the world doesn\u2019t work this way. The markets go up and down, and there\u2019ll always be winners and losers. That\u2019s just capitalism.<\/p>\n

But perhaps the more interesting thing is that not everyone wants to drive a Ferrari. Some people would rather go on a food trip to Bangkok. Likewise, most people probably don\u2019t find joy in buying Oil & Gas stocks. Some people would rather invest their money in properties.<\/p>\n

So the first thing to understand about investment portfolios is that it\u2019s gonna be different for everyone. Let that message sink in for a while. The 25-year-old management trainee will invest differently from the 40-year-old housewife. And even two 30-year-old accountants might have completely different portfolios.<\/p>\n

The great thing is that you get to decide. And you decide based on mainly two things\u2026<\/p>\n

<\/span>Goals and “risk vs reward”<\/span><\/h2>\n

What do you want to achieve by investing your hard-earned money? Or rather, what are your financial goals? For example, common goals for young people are saving for your future child\u2019s education, and funding your retirement.<\/p>\n

And depending on your goals, the way you invest will be very different. Planning for three kids who\u2019ll go to international schools is different from planning for a single kid who\u2019ll go to government school. Likewise, planning to retire at 60 in a seaside village is worlds apart from a Jho-Low-style retirement in a yacht off the coast of Bali.<\/p>\n

Which brings me to a quote I love:<\/p>\n

\u201cIf you want success, figure out the price, then pay it.\u201d
\n\u2013 Thomas Oppong<\/a> \u2013<\/div><\/div>\n

We could all set ambitious goals, but how much are you willing to sacrifice to achieve them?<\/p>\n

And the follow-on money question: How much risk are you willing to live with, to get the rewards that you want?<\/p>\n

Because if you want higher returns, you\u2019re gonna have to get comfortable with higher risk (i.e. higher chance of losing your money). We\u2019ve all heard of high-risk investors losing their health \u2014 and in some tragic cases, their lives \u2014 just because they couldn\u2019t handle the stress.<\/p>\n

On the other hand, if you want very little risk, your investments are gonna take a really long time to grow. That\u2019s just the law of nature, and despite what 100 ugly skim-cepat-kaya gurus may tell you, there\u2019s no \u201chack\u201d around it.<\/p>\n

Now as your brain contemplates the above philosophical questions, allow me to introduce some common ways to design your investment portfolio.<\/p>\n

<\/span>1. Traditional strategy: the stocks-bonds ratio<\/span><\/h2>\n

The classic way of designing an investment portfolio is the stocks-bonds ratio. In a nutshell, you decide how many percent of your investments should be in stocks, and how many percent should be in bonds.<\/p>\n

BTW, when I say \u201cinvestment portfolio,\u201d I mean money that you set apart to grow. This doesn\u2019t include \u201cnecessities\u201d like your emergency savings (aim for: six months of monthly expenses here) and rent\/loans you pay for your home.<\/p>\n

So how many percent stocks and how many percent bonds?<\/p>\n

120 \u2013 [your age] = Percentage of investments in stocks<\/p>\n

Let\u2019s say you\u2019re 35 years old. 120 \u2013 35 = 85. So according to this calculation, you should have: 85% invested in stocks, and 15% in bonds.<\/p>\n

To further illustrate this:<\/p>\n