How To Build An Investment Portfolio for Beginners // Asset Allocation

welcome back everybody and a special warm welcome to all the new subscribers welcome on board okay today's video we are going to be looking at how to build an investment portfolio for ourselves so it's really exciting video we're going to be looking at the three factors you must consider when building your own portfolio also the magic question so the magic Holy Grail question is what is the perfect portfolio for me how I'm gonna be trying to answer that question we'll also be looking at some top tips and some guidance and just bear in mind guys this is a constantly evolving process your portfolio will be changing and evolving over time such as bear that in mind how to build an investment portfolio quick disclaimer this video is for education purposes only you should seek investment advice from a registered professional before making any investment decision this video is not responsible for any investment actions taken by its viewers so gotta get that out of the way first so the holy grail question and the question that you might be thinking right now what is the perfect portfolio for me well the answer is it depends let me explain there's three factors that you have to take into consideration when building a portfolio for yourself factor-1 your age how old you are will make a difference to your portfolio let's take a look so his chart price over time and let's say this is the stock market and what people think the stock market does is this that it just consistently goes up over time however this is not exactly true the actual stock market tends to do something a bit more like this so you can see it has these big bull runs followed by crashes followed by next big bull runs followed by crashes because when we deal with humans unfortunately what drives the markets is fear and greed so is greed when people are buying and everything is going up and asset prices get driven up and then people think oh no it's going to come down and fear sets in and if one panics and everyone sell sell sell sell me it drops the market and this just repeats again and again and again and this is human behavior so your age comes into it because if you are relatively young then it doesn't matter if it crashes and goes up and crashes because you can just sit there and ride it and ride it for 10 20 30 years and you will always do ok because here's a really important fat guys the stock market has always gone up so whenever you hear people losing money in stocks it's because they're selling at the wrong point and if they just hold on the stock market has always gone up so if you're relatively young you're ok the problem comes you're in the later stages of life now you can see these guys they're in the stock market they don't know this but the stock market is about to crash and it could be going down for 2 3 5 years so if they're just about to retire they need their money and they've spent their entire life building this so they cannot afford a stock market crash so whether you're younger or older you're gonna make different investment decisions factor number two your personal risk tolerance there's different people in the world right we've got people that are just safe and secure they they don't have any flash cars flash houses they just they're very happy in life don't like to take many risks on the flip side you've got the other side the people right they love their flash cars they like living a bigger lifestyle the more aggressive risk takers so you have to decide which category you fall into factor number three your personal financial education or this could be known as your financial IQ we've got some people out there that just love studying they'll be watching YouTube videos on finance and investing they'll be reading books and paying attention to the stock market and gold market and current events and they're very knowledgeable about what's going on in the financial world then you've got your other kind of people right and these ones generally just like to come home and chill out right just stick on some Netflix and you just want to relax and chill now both of these lives are absolutely fine you can do what you want you just need to bear in mind that it's gonna lead to different so you're gonna make different choices and you're gonna have a different portfolio because of this so let's give three example portfolios if we give three example portfolios you can then start to get a good understanding of what your portfolio might look like we're gonna be looking at some really common assets just to try and keep this simple so we've got stocks we got bonds we've got rental property we've got Bitcoin or crypto currencies we got gold silver and cash and let's see how these scenarios play out example for folio number one we've got our guy here he's roughly about 25 years old he is willing to take some higher risk for some higher returns and he's got a fairly good financial IQ so his portfolio might looks a little something like this so half of his portfolio is made up of Bitcoin likes to take a bit of risks and he sees that this is an asset class that's got a lot of potential of growth he's gonna be 30% of his portfolio is gonna be in stocks 10% of his portfolio in cash and 10% in silver so you can see that he's willing to take a higher risk because this portfolio might return a hundred percent plus so he could double his money in fact he could get two hundred three hundred four hundred five hundred percent return in a few years with this kind of portfolio however because it's higher risk he's got a bigger chance of losing his money so he has to take that into consideration for himself next up example portfolio number two so here she's about 25 years old again she doesn't mind taking a bit of risk because she's young and she's got time to recover if she makes any faults but this time she doped she's got a lower financial IQ so she doesn't really pay attention or study anything so her portfolio might look a little something like this so we've got a 90/10 split ninety percent of her portfolio is in stocks probably just covering the index so she owns the entire stock market and the other 10% she's got in cash for emergencies or if there's a crash in stocks and she's got a bit of cash to buy more stocks now this is a deceptively simple but very powerful portfolio I'll share with you a big stock market secret so Warren Buffett has said that because he's fine investing I think when he was either nine or when he was I think it was 13 so it's very very young he's obviously bought and sold many stocks in his lifetime and he said of an investment company and he sits and reads financial statements all day every day and amazingly he crunched his numbers and worked out if all he did was just buy stocks his entire life and never sold anything he would be wealthier than he is today and his company Berkshire Hathaway would be making more money so that is a powerful powerful lesson in just buying and holding and that's why she's done so this poll folio might return say on if she does well 10% a year which compounds but over 20 30 40 years that is going to be a very good investment portfolio and last up we're going to look at someone that's potentially later on in life so we'll look at the 60 plus now these are they want to take a lower risk because as we saw they don't want to get caught up in any crashes there were maybe about to retire so they're gonna take a lower risk but they do have a financial a higher financial IQ so they've spent their lives reading about things learning about things and they've got a good understanding of different asset classes so their portfolio might look a little something like this so we can see that half the portfolio is made up of bonds so they're getting a nice steady stream of income and it's a very safe investment they've got 10% in rental properties so they may home one to two properties that's also bringing them an income they have 20% in cash just in case something goes wrong just in case they want to use it for anything else they've got 10% in stocks so they can get a bit of return but they're if the stock market crashes they're still ok and they've got a good ten percent in gold which is a good hedge against any crashes and has always gone up over time so this portfolio is much lower risks are you gonna get a much lower return so they may only get say 5% a year however this is still a lot better than having money in the bank so back to the holy grail question which portfolio is right for you well here's some guidance that I'm gonna leave you with take a look at your age how old are you right now are you young are you older bear in mind your risk tolerance are you prepared to take some risks and also your financial IQ are you gonna be studying the markets are you gonna be getting involved or are you just gonna get a financial advisor to give you some advice so these things will determine what your portfolio looks like a good advice is just start small just start with a really small amount of money because this gives you skin in the game and this means when you've actually got some money on the table you will then really start learning about the asset classes last bit of advice if you're unsure then speak with a professional so it can't harm to speak with a financial professional and get some good advice ok well that wraps up the video if you liked anything in this video then please click the like button below this video because it really helps out the channel if you want to keep learning more about money and finance then be sure to subscribe to this channel and if you've got any questions or comments on this video then post them below now and I'll see you in the next video alright cheers guys [Music]

Channel: Investing Made Simple - Nathan Sloan

Views: 4,523

Rating: 4.9801979 out of 5

Keywords: how to build an investment portfolio, asset allocation, diversification, Harry Markowitz, investment portfolio example

Id: GbqsrDz1EaU

Length: 12min 53sec (773 seconds)

Published: Tue Jun 23 2020