An investment portfolio is a set of assets owned by an individual (investor).
It is not advisable to put all your savings in one investment instrument. Diversification is the safest way to play the investment game, and you can do this by creating an investment portfolio.
An investment portfolio will help balance your risk and returns.
To create a portfolio:
1. Split your investment funds into three buckets.
(a). Long term Aggressive Bucket (LAB).
(b) Medium term Balanced Bucket (MBB).
(c) Short term Liquidity Bucket (SLB).
(a) Long term Aggressive Bucket (LAB)
This is the money you won't need in 11 years and above, like retirement planning. Examples are stock mutual funds, index funds.
(b). Medium term Balanced Bucket (MBB)
This is the money you won't need in 1-10 years. Examples of medium term balanced buckets are treasury bills, money market mutual funds,
(c). Short term Liquidity Bucket (SLB)
These are short term investments that mature within a year.
2. Assign instruments to the three buckets via percentages. For example;
LAB - 65%
MBB - 30%
SLB - 15%
You do not need to be perfect on these percentages, however, stick to your principles of investing and maintain at least 5% difference of each bucket.
While investing in your portfolio, remember that returns may change.
Don't forget to monitor your investments and you can also rebalance them when you go above the percentage you want to hold, and then diversify your investment again.
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