As an entrepreneur, I understand the importance of growing and protecting wealth to accomplish long-term financial goals. A key way to achieve this is through a well-balanced investment portfolio aligned to your situation. Below I‘ll share tips on constructing one.
Clearly Define Your Investment Goals and Risk Appetite
Before deciding where to invest, you must define your goals and risk tolerance. Are you investing for retirement in 30 years or a house down payment in 5? Can you stomach potential losses of 40% or more in a market crash?
Ensuring your portfolio matches your risk appetite and timeline is crucial for success. Conservative investors with near-term goals will want a different asset mix than aggressive investors with long time horizons.
Strategically Allocate Among Major Asset Classes
A common starting point is allocating 60% to stocks, 30% to bonds, and 10% to cash equivalents. However, you can customize based on your needs.
Stocks offer growth potential but higher volatility. Bonds provide income and stability but lower returns. Cash preserves capital but loses purchasing power to inflation.
As an entrepreneur, I allocate 70% to stocks for their long-term growth. I reduce near-term risk through 15% bond exposure and keep 15% in cash for dry powder to invest at market lows.
Diversify Investments Within Each Asset Class
In addition to allocating across assets, you should diversify within each one:
Stocks: Invest across market caps, sectors, investment styles and geographic regions.
Bonds: Own government, corporate and municipal bonds of varying credit quality and duration.
Cash: Keep cash in FDIC insured accounts and short-term CDs across banks.
This minimizes concentration risk and the impact of any single investment tanking.
Consider Alternative Investment Options
For further diversification, I allocate 10% to alternatives like precious metals, real estate crowdfunding, private equity, and crypto. While riskier themselves, adding alternatives can enhance long-term returns.
Manage Costs and Rebalance Over Time
Keep investing expenses like fees, trading commissions and taxes low, as they directly reduce net returns. I use low-cost index funds whenever possible.
Also, rebalance back to original allocations every 6-12 months if they drift significantly. This maintains target risk levels despite market moves.
Sample Balanced Portfolio Asset Allocation
|S&P 500 Index, Nasdaq 100, Global Stocks, Dividend Aristocrats
|Investment Grade Corporate, Municipal, Treasury
|High Yield Savings, 3-6 Month CDs
|Gold, Real Estate Crowdfunding, Angel Investing
Let me know if you have any other questions! I‘m always happy to share my knowledge as an entrepreneur on constructing balanced, diversified portfolios.