• Gary Grewal

7 Items to Consider When Creating an Investment Portfolio

Updated: Apr 22

Our friends over at Wallet Squirrel were kind enough to allow us to write up a guest blog post on what to consider when creating an investment portfolio. Check it out! Investing is one of the most obscure things to most people, and they put their hard-earned money into it. Don't let it scare you! We're here to break down the most important points and help you devise an investment plan that works for your goals. As always, keep in mind this blog is for information purposes only and should not be taken as advice!


This post originally appeared on Wallet Squirrel on 3/25/21 and has been republished with permission




You could read countless articles and read hundreds of books that will tell you how to choose investments and allocate your investment portfolio. For every argument for a certain kind of investment, there is one against it. You need to know that only you can determine what is best for you and equip yourself with impartial knowledge from trusted sources. Ask friends, read online forums, and take these five steps as a foundation for developing your portfolio.


I’ve been in the financial planning industry for over ten years and started investing in the market when I was 19 years old. Not to date myself, but I saw the 2008 crash and the impacts of the following recession. That was an eye-opening experience if there ever was one. When you’re newly minted in the working world and impressionable at that young age, you look up to people more senior to you for guidance. Everyone I talked to said the economy was crashing, and get your money out while you can. Yet, on the other hand, everything I read said to stay invested, and buying stocks during a downturn is like buying them on sale.


So, I learned to ignore the noise and learned it at the right time. I didn’t have a huge amount in the market, but by learning about diversification, low-cost index funds, dollar-cost averaging, and how time in the market is more important than timing the market, I was able to learn how to create a robust investment portfolio.

Keep in mind the below guidance is for informational purposes only and should not be taken as investment advice. It is not intended to provide specific recommendations for any individual or entity or replace the guidance of a financial planner or tax planner.


1) Know your Objective


When you’re selecting investments for your investment portfolio, you first want to determine what the money’s for. Retirement? Buying a house? Starting a business? Or maybe, you make so much money you need somewhere to throw it (If only, #AmIRight?). This will help you build out what kind of investments you want.

For example, if you’re saving up for a house in the next 3-5 years, maybe you want to look for more secure investments, such as a CD or balanced mutual fund/ETF. If the money is for your newborn’s college, stocks and ETFs are your friends.


2) Know The Timeline for Your Investment Portfolio


This is important because you want to select investments that align with the amount of time you will need to liquidate your investments, as well as to have time to recover from market volatility.


So, for retirement in 30 years, you can invest in instruments that have low liquidity or high volatility in exchange for higher returns (equities). If the money is for a car in a year or two, you probably want to invest cash equivalents or something you can liquidate easily, such as a short-term CD or money market account that won’t fluctuate as much, if at all.


3) Know Your Comfort Level with Risk


This is key because no matter what financial experts say you should invest in, only you know where you feel comfortable putting your hard-earned money. There are several risk-tolerance questionnaires (RTQs) on the web that can help you get started. They’ll ask how you would respond to a certain market event or what you are willing to give up in order to earn higher returns. Stocks, ETFs, mutual funds, bond funds, real estate, cash, and everything in between are potential contenders for your portfolio mix.


You just want to make sure you understand and feel comfortable where you put your money and be able to stick it out through volatility, political turmoil, or anything else that will make you feel as if the world is ending.


4) Know the Fees Associated with what You Buy


When you decide to open a brokerage (trading) account or IRA, you’ll want to figure out what the account minimum is and any fees for trading. Some brokerage companies offer free trades for their proprietary funds and ETFs, and some offer free trades for all stocks and ETFs.


You also want to make sure you understand what fees are involved in the funds you buy for your investment portfolio. Some mutual funds have sales charges or loads, and all have expense ratios for ongoing management of the fund. ETFs are popular for the reason that they trade like stocks (no loads or sales charges) but have the diversification of a mutual fund in that they own many stocks within them. Use a screener to find low expense funds that meet your criteria. You can’t control what returns you will earn on your investments, but you can control the fees, so look for low expense ratio funds, no transaction fee funds, and ask your brokerage company for free trades.


NerdWallet.com has a decent guide on how to select a company to open your investment account: NerdWallet Investing. Both Andrew and Adam of Wallet Squirrel use Robinhood for their investing platform.


5) Decide on Your Investment Portfolio Philosophy and Do Your Research


Are you completely turned off by logging into your account to trade and rebalance, nonetheless, different research investments? You may want to look at a professionally managed investment portfolio or maybe even a Robo Advisor to get started.

If you want to manage your own account, do you want actively managed funds or more inclined toward a passive index funds strategy? Most brokerage companies have research tabs where you can find out fundamentals, past performance, analyst ratings, and more for various stocks and funds.


Do you want to screen out companies that invest in fossil fuels or those that focus on impact investing? This is possible, as well. Morningstar.com can provide a star-rating for the funds, along with globe ratings for sustainability. Along with the custom screening, many brokerage companies offer an approved list of strong performers in each category, such as large-cap value funds or emerging markets funds.


6) Question #1 if you want to hire an advisor for your investment portfolio


How do you come up with the advice you give me? You should know what resources the planner uses to develop financial or investment recommendations.

Do they read financial journals, use online screeners or Morningstar? Or do they just use some online calculator for asset allocation and throw in some generic index funds you could have done yourself?


You want to make sure that if you are paying them, they are adding value to what you are trying to accomplish, such as saving you time or providing their expertise. The other thing is, never invest in something you don’t understand, especially when promised with high returns and low risk. If it sounds too good to be true, it probably is.


7) Question #2: How will I know you have my best interests in mind?


One way to do this without asking the question is by looking up their credentials. If they are a CFP®, they are held to a fiduciary standard as part of their certification, meaning they have your best interests in mind when making recommendations. Check out BrokerCheck on finra.org.


Certifications also display their commitment to the profession and in continuing education, so they know what they are talking about. Ask if they receive any kickbacks for referring you to a banker, CPA, life insurance agent, attorney, etc. Do they look out for load funds, so the money you invest actually goes into the investment and not their pocket?


Search for the professional you are considering on Google. Also, check out Investor.gov for links to vetting the background of the planner, such as years in business and if they have any disciplinary actions on file.

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