How To Build an Investment Portfolio - Asset Allocation!

hey guys welcome back now one of the most important parts of investing is knowing where to put your money also known as asset allocation many experts agree that asset allocation is probably the single biggest factor that will determine your investing success so pretty important stuff right yet what i find quite surprising is that this is such a critical part of investing yet i rarely see other big youtube finance channels covering this topic i guess it's not quite as sexy as saying this is the next stock that is going to 10x so for this reason i felt i had to share some of the key concepts and principles i have learned to help you guys with your own asset allocation now the million dollar question is this what is the perfect portfolio allocation well unfortunately it doesn't exist the truth is that it's going to be different for every single person as the several factors that we need to take into consideration so in this video we will be covering the objective of investing what is it that we're actually trying to do we'll look at the seven main asset classes these are all the different places that you could be putting your money the risk curve this is such a crucial piece and you will need to decide where you sit on the risk curve and then we'll finish with some example portfolios from some billionaire investors and i'll also include my own so this will all begin to make sense as always if you do find anything useful in the video be sure to drop a like always very much appreciated okay so the starting point is getting clarity on what it is we're actually trying to do check it out what is the actual objective of investing well if we break it down to its simplest form it's essentially using money to make more money and so by doing this by default we are putting our money at some kind of risk so the equation is always what's the risk reward ratio i think we're all pretty good at knowing what the reward is and making money but 50 of our time should be on analyzing the risk so what are the seven main asset classes where you can put your money to work let's begin with stocks and you can do this in many different ways depending on how much risk you're willing to take this could be index funds or etfs it could be individual stocks or you could be buying on margin or using puts and calls we have bonds and again you could go super safe with government bonds or venture out to corporate bonds or even the high-yield junk bonds we have property and this could be residential or commercial it could be a single unit multi-unit apartment buildings we have cash and cash equivalents so this would be money in the bank but this would also include short-term bonds cds as they can be quickly liquidated into cash we have commodities and the two most famous will be gold and silver or if you have the knowledge you could venture out into oil or copper or many other commodities like sugar wheat we have the brand new kid on the block bitcoin and now the other crypto currencies there's now about 9 000 to choose from and finally we have alternatives so there are many things that fit into this category some people like to collect cars it could be watches it could be artwork we now have the nft market or even something quite niche like pokemon cards but essentially these are the different places where you can put your money to work now i get comments every single day from people saying things like should i buy this particular stock or should i buy this particular etf or is it too late to buy ethereum or should i be selling my stocks now and unfortunately it's always impossible to answer these questions because it depends on several factors and where you sit on the risk curve now the risk curve is something that you're going to want to spend a lot of time on and master and i will refer to it again and again and again because it's such a crucial part to investing check it out so this is the risk curve and essentially it's made up of two parts you've got the potential reward and yes it's potential as nothing is really guaranteed and how much risk you are willing to take and you will need to decide as an investor where you sit on this risk curve and the reason it's different for every single person is that we all have different situations some people have a high income some people have a low income some people may have lost their job some people may have just got a high paying job we have the size of the portfolio a ten thousand dollar portfolio is probably going to be very different to a hundred thousand dollar portfolio which is probably going to be different to a million dollar portfolio everyone has a different risk tolerance there are some people that just don't want to take a lot of risk and there are people that are happy to take more risk to get more of a potential reward we all have different objectives whether it's we're trying to double our money in the shortest time possible or build a solid retirement we all have a different financial knowledge how much do you know about stocks about the different bonds about the different commodities the different cryptocurrencies and then remember we all have our own personal opinions and biases that we sprinkle over the mix as well so we can do this on a portfolio level but we can also do it on an asset class level as well take stocks for example now you could just invest in an s p 500 index fund you'd be sitting around about here you'd have a lower potential reward but you're not taking that much risk if you hold on to it for 10 to 20 years you're virtually guaranteed to be making money you can head further down the risk curve if you want to start picking your own individual stocks you can make a much potential bigger reward but you are taking more risk that an individual stock can go out of business and you can head all the way down to things like penny stocks where you could be making 100x on your money but again this is very risky you can do this with bonds you can stick to government bonds which is one of the safest places to put your money as the government is very unlikely to go out of business you can go for the big corporate bonds or you can venture out to the high yield bonds it works with gold and silver the gold has a 5 000 year track record it does go down so you're taking some risk but over time it's always held its value or would you head out and maybe take on silver you're taking more risk as silver is a lot more volatile but you get a potential bigger reward you can do this with cryptocurrency so bitcoin is the equivalent of the blue chip company in crypto you could venture out a little bit with ethereum you can venture out and start playing around with a lot of the altcoins in the top 100 you could yolo on dogecoin or if you want to go down to crypto number 4000 and go all in yes you could get a hundred thousand times your money but you're taking an incredible amount of risk and the other part of this whole thing is on a portfolio level so a portfolio a hundred percent in bonds would be down here if you wanted to do 50 50 with stocks if you wanted to add in some commodities if you wanted 50 50 with cryptocurrency or if you're younger and don't have as much money you can do a hundred percent in crypto currencies and the reason this is so important is that it answers all the questions should you buy this stock should you sell this cryptocurrency should you move into this fund well it all depends on where you want to sit on the risk curve so we know the objective of investing is using money to make more money and by doing that we are essentially putting our money to some degree of risk now the whole idea behind building a portfolio that is diversified is that it lowers your risk and also the chances that you could lose everything by putting all your money in one place so the million dollar question is not what is the perfect portfolio it's what is the perfect portfolio for you well there are two main options you could go to a financial advisor or money manager and they will work with you to do this or you could learn how to do this yourself and as an investor this will be something that you're constantly working on and improving over time one of the best ways i know to answer the question where should you put your money is to get lots of different reference points the more portfolios of other people that you see the more it will begin to make sense so one of the best things you can do is start analyzing the portfolios of other people other big investors other youtube finance channels friends colleagues books think of a table with only one support it's at risk of falling over as it only has one reference point but a table with hundreds of reference points becomes a lot more stable and this is why you should never just copy off one person's portfolio as you don't know their full profile okay so to get started here are some portfolios of some billionaire investors like warren buffett ray dalio jack bogle and i'll also include mine at the end check it out so first up we're going to start with the man himself warren buffett and he advises for the vast majority of people a 90 10 split 90 in stocks and 10 in short-term government bonds or this could also be cash as this is a cash equivalent and warren buffett recommends a low-cost s p 500 index fund and there's always pros and cons to every portfolio so this portfolio suits a wide range of people young people middle age people a low amount of money a high amount of money if the stock market is going up then you do really really well if there's a big drop or crash you've got money to deploy and this will also make an excellent portfolio for a complete beginner warren buffett doesn't really invest in properties he doesn't like gold he's not a fan of bitcoin or crypto currencies but remember this is the world's most successful investor next up we have robert kiyosaki from the rich dad series and just to be clear he's never actually publicly stated what his portfolio is but i'm very familiar with his work i've read most of his books seen lots of interviews so i've pieced together what i think his portfolio would look like now we do know that he's got thousands of units of apartments so his portfolio will be heavily dominated by real estate he likes the leverage he likes using debt to get rich and you get really good tax advantages he's said in public many times that he doesn't invest in stocks so zero stocks in this portfolio and he is a fan of hard assets so real estate he does really like gold silver and he's recently been buying bitcoin and ethereum and you can see just how different this is to warren buffett's next up we have jack bogle of vanguard and the creator of the index fund and for the vast majority of people jack recommends going a hundred percent in stocks for the vast majority of your life he wasn't really around for cryptocurrency he wasn't a fan of gold and he would invest in a total stock market index fund ticker vti which is very similar to an s p 500 and as he got into retirement he then moved to 50 in bonds and this helps reduce the risk so if there's a stock market crash he doesn't lose everything and this was his retirement portfolio we then have the famous all-weather portfolio from ray dalio and this is a portfolio that's been designed to do well in all scenarios economic growth economic decline times of inflation and deflation so you can see this is really heavy into bonds there's a nice strong stock position he is a fan of gold and also a commodities index and this is not really an accumulation portfolio this is probably for people moving into retirement or if you've got a large amount of money this is more how you protect your wealth and lastly i'll show you mine as you can see it's now over 50 percent into crypto we have 33 in stocks and 15 in cash now from an outside point of view this looks like a very risky portfolio but here's another important lesson you always need to make sure that you see the full picture so this in fact is just the liquid portfolio when you include the personal residence which is the net worth you can see almost half of it is now in property which is very very safe i spent quite a few years really paying down the mortgage so i have the largest part of the money that is pretty safe and that means with the rest of my portfolio i can be more aggressive further down the risk curve to try to capture bigger gains so always ask the question are you seeing the full picture so there you are guys lots covered and let's bring all this together the objective of investing is using our money to make more money by doing this we are essentially putting our money at risk and so you need to decide where you sit on the risk curve the seven main asset classes were stocks bonds crypto cash and equivalents commodities and alternatives the more portfolios you see and analyze the more this will all begin to make sense and you'll know what is right for you and a great place to get started would be a low-cost s p 500 index fund in a tax-efficient wrapper and from there you can build it out obviously there's so much more we could cover but this was just to give you a high level overview of some key concepts and principles so hope you found this useful and with that being said just one favor to ask if you did find anything useful in the video be sure to drop a like and a big thank you to everyone who does if you haven't yet subscribed to the channel i invite you to click below and join us i do have some great videos coming up that you don't want to miss also please be careful guys i do have someone cloning my site and pretending to be me just know i'll never ask you to buy anything in the comments and i'll never ask you to text some dodgy whatsapp number okay cheers guys thanks for watching and i'll see you in the next video bye for now [Music] so you

Channel: Investing Made Simple - Nathan Sloan

Views: 27,089

Rating: 4.9771547 out of 5

Keywords: How To Build an Investment Portfolio, Asset Allocation, how to build an investment portfolio for beginners uk, investment portfolio examples, what is an investment portfolio, asset allocation examples, asset allocation recommendations, asset allocation by age, asset allocation 2021, asset allocation strategy, what is strategic asset allocation

Id: 6-tqUtwqxlI

Length: 15min 56sec (956 seconds)

Published: Wed May 05 2021