There is no shortage of tipsters around offering "get-rich-quick" opportunities. But if you are a serious private investor, leave the Las Vegas mentality to those with money to fritter. The serious investor needs a proper "portfolio" -- a well-planned selection of investments, with a definite structure and a clear aim. But exactly how does a newcomer to the stock market go about achieving that?
Well, if you go to five reputable stock brokers and ask them what you should do with your money, you're likely to get five different answers, -- even if you give all the relevant information about your age, family, finances and what you want from your investments. Moral? There is no one "right" way to structure a portfolio. However, there are undoubtedly some wrong ways, and you can be sure that none of our five advisers would have suggested sinking all (or perhaps any) of your money into Periwigs.
So what should you do? We'll assume that you have sorted out the basics -- like mortgages, pensions, insurance and access to sufficient cash reserves. You should then establish your own individual aims. These are partly a matter of personal circumstances, partly a matter of psychology.
For instance, if you are older you have less time to recover from any major losses, and you may well prefer to boost your pension income. So you might be more conservative with your investments. On the other hand, if you are younger and can afford to take the long view, you may decide to invest in more speculative stocks, hoping for that big kill in a few years' time.
If you are closer to the "get - rich - quick" end of the spectrum, you will be more interested in speculative stocks that may double or triple in a short time. If you are at the more conservative end, you may prefer bonds or cash deposits. Once you have decided on your investment aims, you can then begin to look for the best investment vehicles to achieve those aims.
The stock market offers a vast array of different investment vehicles, from blue - chip stocks to penny stocks, from bonds to real - estate investment trusts. You need to understand the characteristics of each type of investment vehicle, and how they fit into your overall portfolio. For example, blue - chip stocks are generally considered to be more stable and less risky than penny stocks. Bonds are generally considered to be more conservative than stocks, but they also offer lower returns. Real - estate investment trusts can provide a good income stream, but they are also more sensitive to changes in the real - estate market.
You also need to consider the costs associated with each type of investment vehicle. Some investment vehicles, such as mutual funds, have relatively high management fees. Others, such as exchange - traded funds, have lower management fees. You need to make sure that the costs associated with your investments do not eat up too much of your returns.
Finally, you need to keep an eye on your portfolio. You should review your portfolio regularly, at least once a year, to make sure that it still meets your investment aims. If your circumstances change, such as if you get married, have a child or change jobs, you may need to adjust your portfolio accordingly.
In conclusion, planning a share portfolio is not an easy task. It requires a good understanding of the stock market, a clear set of investment aims, and a willingness to keep an eye on your investments. But if you are a serious private investor, it is well worth the effort.