Building and maintaining your portfolio doesn’t require fanfare or drama, nor does it have to be intimidating. With these few steps build a portfolio that suits your financial needs and solidifies your decision to make the investment.

Step 1: Create goals for yourself so you can allocate your assets.

When you make the decision to invest and create a portfolio, it is important to know why you’re investing. The “why” carries the timeframe of your investment, which greatly impacts how you allocate your assets. The longer the timeframe for your investments, the more aggressive your portfolio can be. Do your goals and timeline allow for moderate to significant amounts of risk? How much money do you need to have saved? How long will that money need to last? The first, and likely most important step of building your portfolio is to answer the aforementioned questions and create goals for your portfolio and investments. Without goals, there is no guidance for allocating your assets.

Now, allocating your assets is an important part two after you’ve set goals for yourself. The goals you’ve set will determine how you allocate your assets for your portfolio. When allocating your assets, there are three main categories to consider. The first of the categories is stocks. Stocks are higher risk options but allow for greater gain and the potential to beat inflation prices. Stocks typically require a longer timeframe to be worth their level of risk. The next category is bonds. Bonds generate income and come with less risk than stocks. The final of the three categories is cash. Cash investments allow for short term needs and also provides more stability as it comes with the least amount of risk for potential loss. Depending on how aggressive or conservative your portfolio, your investments will vary among these three categories. Unlike other methods of investing, your portfolio will require you to review it regularly. You cannot be satisfied and leave it alone or you run the risk of ending up with a different asset allocation or potentially a very costly portfolio.

Step 2: Build a portfolio that meets your needs. 

Step two is the big one. It’s time to actually build your portfolio. Now that you have your goals and know how you want to allocate your assets, it’s time to do it. Take a look at your goals, how you want to allocate your funds, and select where you want to invest.

Be true to your goals and the amount of risk you can afford to take with your asset allocations. The potential reward for stocks is tempting, but if you don’t have the time to invest in such a volatile market, beware of the greater potential for loss. When investing in the market, (or anywhere else for that matter) be wary of fads. Often fads have already returned their highest profits by the time they’re known for being a popular entity. Take the time to carefully review, or have a financial advisor review what stocks, bonds, and cash investments you’re bringing into your portfolio.

Although there are no guarantees, doing your research of the market, the company, and history of the stock can go a long way in decreasing the risk of a potential loss. Investing in commodities, especially as interest rates are increasing, can also reduce the potential risks of your portfolio as a whole. Above all else, stay true to your goals and timeline when building your portfolio. If you take the time to do the research for what you’re investing in, all that’s left to do is make sure your picks match your established plan to optimize your portfolio.

Step 3: Be consistent & follow the plan.

The final step to building your portfolio is a simple one: follow the plan you’ve made. Check on your portfolio to make sure that everything is how you want it to be. Be aware of how volatile the market can be, don’t cut something lose just because it isn’t doing well at that moment. Keep the big picture in mind and be sure to try to ride the market rollercoaster with your higher risk investments. Ride out the market swings and stick to your plan. As long as your financial situation hasn’t changed, neither will your plan.

Being clear about your goals and options while maintaining a consistent path of getting there is an essential role of the process. Never hesitate to seek out a financial advisor to review your portfolio annually, or to even build your portfolio are common routes to take. It is difficult to balance building your present while planning for your future. When it comes to your retirement, a portfolio that suits your financial needs is a sound investment.

When it comes to aggressive portfolios, being a millennial with time to spare is your greatest asset. The key to aggressive investments is having the time and patience to ride the financial rollercoaster with your investments. Now, let’s talk portfolios.

Mountain ClimbingBeginning with the basics, a portfolio is a combination of various assets that are chosen to match your investing goals. Assets range from real estate, equities, stocks, bonds, and fixed-income instruments. As with many things in life, there are conservative portfolios, moderate portfolios, and aggressive portfolios, along with everything between. Aggressive portfolios shoot for the highest possible return. Due to the high risk of shooting for the highest possible return, aggressive portfolios are best suited for investors who have a higher risk tolerance or the time to ride out the fluctuations among their investments.

The average time invested in an aggressive portfolio should be no less than 15 years. Having a high tolerance for risk and having little to no need of the investment income is also ideal. To utilize an aggressive portfolio properly, allowing your investments time to fluctuate and wait out the risks is essential for your potential gain. The average annual return among aggressive portfolios is 10.3% with fluctuations as low as -36.0% or as high as 39.9%. With such drastic fluctuations, it is imperative to have the time to sit and wait out the highs and lows that come with an aggressive portfolio. 

Despite that playing it safe is often the practical option in finances, millennials are at a point in their lives when now is the time to take a risk. The closer you get to retirement, the fewer risks you can afford to take. In most stable value funds, the money increases nominally. When you compare the nominal interest to inflation, you might as well have hidden your money under the couch. Although aggressive portfolio equities typically have more risk, the potential to gain is higher when you add in having time on your side, the risks become more practical than playing it safe. 

Now, the best starting point for cultivating an efficient aggressive portfolio is seeking a financial advisor who can assist in sorting out which equities are worth the risk. The basics among aggressive portfolios are fairly universal. Investing in small capitalization stocks is an essential part of aggressive portfolios. The obscure businesses associated with these stocks have the time and usually the potential to become more prevalent in the market and potentially become market leaders. You want to spread your investments predominantly among large and small company leaders and minimally on cash investments. Your investments in companies should reflect the potential for growth, capital gains possibilities, and innovation.

An aggressive portfolio may not be right for everyone. Despite the high potential return, the high risk and lack of potential income can be problematic. If you have time on your side, it may be time to consider a more aggressive portfolio. Wasted time is often as problematic as wasted money. When your time can be as valuable as your money, an aggressive portfolio might be the answer.

Since childhood, it has been engrained into our minds and lifestyles that it is important to be aware of our financial situation. Whether that meant stashing the five-dollar bill you got for allowance every week in a shoebox under your bed or setting up a bank account. It’s an important aspect of life because – to be quite frank – money runs the world.

As you get older, saving money becomes increasingly more difficult than simply throwing a few bills into a shoebox and deciding not buy that candy bar you see at the grocery store. You have to start spending money on a never-ending list of expenses – gas, rent, bills, student loans and more. Everyone wants to save and, for the most part, understands how imperative it is, but not everyone knows where to start or if they can afford to save.

We’ve compiled a series of tips to show you that saving is always possible in one way or another.

Invest in Your Future by Numbers

Have you heard of the Rule of 10? Rule of 72? The 50/20/30 budgeting guideline? Are your eyes starting to cross due to number overload yet? Don’t worry; let us break it down for you.

Rule of Minus 10

Saving money while in your twenties may seem like a faraway daydream or #lifegoal, but if you start small it’s possible. The Rule of Minus 10 says that individuals in their twenties should try to save about ten percent of their income for future retirement. At a young age, when you feel like you’re just starting out and earning a salary, it can seem like quite the investment. But think of it this way: the percentage amount you have to save increases the longer you wait. If you start in your thirties, that number increases to twenty percent and so on. So what’s the holdup?

Rule of 72

If you already have investments or are planning on making one soon, the Rule of 72 breaks down how to calculate the percentages being thrown your way and determine if it’s worth your while. It determines roughly how many years it will take for you to double your investment. How? Divide 72 by the annual rate of return on your investment and that is how many years you’re looking at until your money doubles. It’s easy while giving you a perspective on a timeline.

50/20/30 Budgeting

Taking full control of your money and applying a budget system is exponentially easier said than done. It can start as a good idea and end in an exasperated sigh as you give up. This is mostly due to there being too many avenues to take which makes categorizing a budget difficult. The 50/20/30 budget simplifies that. This budgeting technique suggests that fifty percent of your take-home pay should go towards fixed expenses including rent, utilities, gas and groceries. Twenty percent of your income should go towards building a structured financial support system via retirement funds, debt payments and other investment goals. Lastly, the remaining thirty percent should go towards fun lifestyle choices that aren’t essential such as entertainment, spending a night out or shopping. Sticking to this simple budgeting method will allocate your funds and not have you questioning where or when your money disappeared.

These rules are some of the basic guidelines to keep in mind when saving, budgeting and investing. They can help you keep a simpler grasp on the financial world that can quickly get muddled down with percentages and numbers.

Understand Your Options

The options are vast and nearly limitless when it comes to investing and saving for retirement or the future in general. Chances are high that you’ve heard of a 401(k), an Individual Retirement Account (IRA) or a Roth IRA.

Another option for investing is to invest in your childrens’ future education with the 529 Plan. It allows you to set up a fund for a beneficiary (likely a child or grandchild) for their future education expenses without annual income taxes. Nearly every state has this type of investment plan option in one way or another.

Understanding your investment options is a key component of getting the most out of your money.

Cut the Plastic

Credit card options and offers are everywhere once you hit the age of eighteen. Offers start popping up in the mail every month, retail stores continuously offer discounts if you open a card and payment plans on bigger purchases usually seem logical. It’s tempting and it’s instant. If you want to save money, however, cut the extra unnecessary plastic. A piece of plastic hiding out in your wallet serves no benefit besides acting as a security blanket for more expensive purchases. A study done in 2001 by two Massachusetts Institute of Technology professors – “Don’t Leave Home Without It” – found that people with credit cards are more likely to spend money on an item than those who only use cash. Most of the time credit cards are used when you don’t have the money on hand. What most consumers tend to overlook is that you are expected to have the money later when the bill arrives. So, cut the plastic and save by resisting the urge to spend what you don’t have.

These are just a few of the many tips on how to go about saving your money, but the key is to be educated on options before making a big decision.

Luck and skill are two sides of the same coin when it comes to investment. One cannot exist without the other playing a crucial role. Taking a trip down memory lane and utilizing dictionary definitions; skill is the ability to do something well and luck is when success or failure is brought about by chance rather than one’s own actions. Skill is easy to understand, you develop necessary traits to excel in your field of interest. Luck is more difficult to understand as it so readily creeps into our lives and can easily influence our successes and failures. Michael Mauboussin says there are three conditions for luck to exist over skill; the first being that it operates on an individual or organizational basis, the second that it can be good or bad, thirdly being it is reasonable to have expected a different outcome. It is easy to identify skill in sports, but when it comes to investing, luck easily creeps in and can alter the outcome and overshadow skills.

Identifying luck versus skill becomes a tricky part of investing and choosing a financial advisor. As luck and skill are often disguised by one another, Mauboussin gives an easy way to tell the difference. His suggestion to deciphering between luck and skill is to lose on purpose. Now, when it comes to your own money, losing on purpose or a financial advisor who loses is less than ideal. Fear not, investing is difficult to lose on purpose. Although it is difficult to build a portfolio that comes out ahead of its benchmark, it is far more difficult to intentionally build one to fall well below its benchmark. Which Mauboussin says is suggestive that investing is significantly more luck than skill.

Part of the reason investing is so luck driven, is that the stock market is run by chance. Short-term investments are greatly run by luck, as forecasting the one-year return on stocks is difficult at best due to them being a function of chance and outside situations that may occur. Long term investing still maintains a significant amount of luck but allows more skill to manage how it plays out. Over the long term, you are able to monitor not only the outcome but also the process used by the investors. Skilled investors will shake off the bad luck and less than desirable outcome and their sound process will eventually be in tune with luck for consistently positive results.

The perfect blend for a positive investment is good luck blended with expertise skills. Unfortunately, luck is not something that can be planned for and luck can also hide or amplify an investor’s skills. When it comes down to it, investors don’t know the future. Everyone must rely on luck and their individual process to work and hope for a positive outcome. The proper skills can make the investing process safer so that bad luck doesn’t keep you down and out. Begin your investment process by being aware of the potential losses. We are well aware of the potential gains or we wouldn’t be investing in the first place. Recognizing the potential loss and being defensive about your investments allows for the safest manner of gain along with armor against bad luck.

It is human nature to want to take the idea of luck out of investing. If you do well and show a positive return, you must be talented. If you do poorly and show a loss, you must be lacking the proper skills. Unfortunately, investment is not that simple. A loss does not mean you are unskilled, it may mean you were unlucky in the short term. A flawless portfolio may be indicative of a lucky but clueless investor whose statistical success will eventually run out.

When balancing luck versus skill, it is important to remember that, in the long run, skill will win over luck. Planning for the loss and investing defensively will guard against bad luck and will allow the time to develop your skills and further the potential for positive long-term gains.