Once you have an understanding of why you should invest, it is important to learn how to build a diversified portfolio that utilises the range of asset classes available to you. Remind yourself about the different types of assets and investors below.
Building a balanced investment portfolio involves allocating your capital between different financial instruments, taking into consideration the wider market conditions, as well as your risk tolerance and overall investment objectives.
Stocks
Stocks are a type of security that gives holders a share of ownership in a company. The stock market has historically made long-term gains, but the price of a stock can be impacted by both company-specific and market-wide events.
ETFs
Exchange-traded funds (ETFs) are a collection of stocks and bonds that can provide you with access to multiple markets, thereby increasing your portfolio’s diversification.
Commodities
Commodities are natural resources or agricultural products that can be used to produce more complex goods. They are often bought and sold by investors because of their low correlation with stocks and shares.
Indices
Indices track the performance of a group of assets in a single trade. An index should not be heavily impacted by the price movements of an individual asset, but its value will often fluctuate in line with broader investor sentiment.
Forex
Forex trading involves trading one currency against another, with the aim of taking advantage of changing currency exchange rates. Trading currency pairs can be done with small amounts of capital, but there are plenty of risks attached.
Cryptocurrencies
Cryptocurrencies are digital currencies based on a blockchain. Although they are unregulated, cryptocurrencies are secure and do have value. However, their price is very volatile in nature!
Fixed-income investments
Fixed-income investments typically involve government and corporate bonds, certificates of deposit and certain funds. Fixed-income assets are often traded to offset higher-risk assets, such as stocks.
Types of investor
The Building Your Portfolio course should also have taught you about the different types of investors, with active investors trying to beat the market and passive investors attempting to track its overall performance. In addition, you will have also learned the difference between value, growth, income, index and momentum investors.
Start building your portfolio
Following the Building Your Portfolio course, you should have a good understanding of the different asset classes available, as well as some of the different investment approaches. If you are confident, consider testing yourself on your newfound knowledge! If not, perhaps revisit the course and rewatch the educational videos or reread the course content.
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This information is for educational purposes only and should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to, buy or sell any financial instruments.
This material has been prepared without regard to any particular investment objectives or financial situation and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Not all of the financial instruments and services referred to are offered by eToro and any references to past performance of a financial instrument, index, or a packaged investment product are not, and should not be taken as, a reliable indicator of future results.
eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this guide. Make sure you understand the risks involved in trading before committing any capital. Never risk more than you are prepared to lose.