Are you trying to decide whether it’s time to start building an investment portfolio? If so, the answer is ‘yes’! Although only 56 percent of Americans own stock, buying shares can be a great way to build wealth.
Before you start investing your hard-earned money, you need to know about investment portfolios and how they can change your life. Read on to find out what goes in an investment portfolio and how it can help improve your finances!
Understanding an Investment Portfolio
Have you ever overheard a friend or family member talking about “their portfolio”? This conversation is often based on how someone’s investments are performing.
Some of the most common forms of investments in an investment portfolio are stocks and bonds. A share of stock represents a small ownership interest in the underlying company. These are often purchased in the stock market through brokerage houses or financial advisors.
Bonds are fixed-income investments that represent an underlying value. This value depends on many different factors. These instruments are often issued by governments or companies. They use bonds to raise money for large projects or operations.
How to Make an Investment Portfolio
Establishing an investment portfolio is a crucial part of your financial well-being. Before you begin adding stocks, bonds, and other instruments to your portfolio, you need to consider your risk tolerance.
What is risk tolerance and why is this important? Think of it as the level of risk you are willing to take to earn a return. Although not a rule of thumb, the higher the level of risk you take, the higher the potential return you can earn.
It’s important to remember that there are no guarantees when you invest in stocks or bonds. With that important lesson in mind, you can begin looking at potential investments that are suitable for your situation.
Talk with a financial advisor or other professional about different investment options and the pros and cons of each one. This will help you gather the information you need to make the most appropriate decisions.
Investment Portfolios Can Change Lives
The decisions people make with their investment portfolios today can change their lives now and into the future. It can also help build generational wealth that is passed down to descendants for many years to come!
Did you know if you bought $1,000 worth of Facebook stock at its initial share price of $38, it would now be worth almost $4,900 today? That’s a huge return when you consider Facebook’s initial public offering was in 2012!
The Facebook stock example is not an everyday situation. It’s used to help illustrate the opportunities that exist by investing in the stock market.
Are you looking for other great ways to build wealth with the income you earn? Check out our blog section for posts with helpful tips and tricks to give you the investing edge you need!