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Lesson 48 |
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Planning a share portfolio |
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How does the older investor differ in his approach to investment from the younger investor? |
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There is no shortage of tipsters around offering 'get-rich-quick' opportunities. |
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But if you are a serious private investor, |
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leave the Las Vegas mentality to those with money to fritter. |
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The serious investor needs a proper 'portfolio' --a well-planned selection of investments, |
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with a definite structure and a clear aim. |
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But exactly how does a newcomer to the stock market go about achieving that? |
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Well, if you go to five reputable stock brokers and ask them what you should do with your money, |
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you're likely to get five different answers, |
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-- even if you give all the relevant information about your age, family, |
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finances and what you want from your investments. |
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Moral? There is no one 'right' way to structure a portfolio. |
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However, there are undoubtedly some wrong ways, |
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and you can be sure that none of our five advisers would have suggested sinking all |
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(or perhaps any) of your money into Periwigs. |
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So what should you do? |
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We'll assume that you have sorted out the basics--like mortgages, pensions, insurance and access to sufficient cash reserves. |
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You should then establish your own individual aims. |
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These are partly a matter of personal circumstances, partly a matter of psychology. |
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For instance, if you are older you have less time to recover from any major losses, |
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and you may well wish to boost your pension income. |
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So preserving your capital and generating extra income are your main priorities. |
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In this case, you'd probably construct a portfolio with some shares (but not high risk ones), along with gilts, cash deposits, |
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and perhaps convertibles or the income shares of split capital investment trusts. |
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If you are younger, and in a solid financial position, |
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you may decide to take an aggressive approach--but only if you're blessed with a sanguine disposition |
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and won't suffer sleepless nights over share prices. |
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If you recognize yourself in this description, |
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you might include a couple of heady growth stocks in your portfolio, alongside your more pedestrian investments. |
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Once you have decided on your investment aims you can then decide where to put your money. |
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The golden rule here is spread your risk--if you put all of your money into Periwigs International, |
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you're setting yourself up as a hostage to fortune. |