Building a portfolio
This infographic is entitled building a portfolio. To build a portfolio that helps meet your needs, walk through these five steps. Step one. Determine how much time you have until you'll need the funds. More time equals ability to ride out volatility of stocks for potentially higher return. Less time equals less volatile investments (bonds and cash) to preserve what has been saved. Graphic: Chart depicting high volatility from 30 to 15 years until reaching your target goal, and less volatility nearing 3 years out from reaching your goal. Step two. Consider your risk tolerance. How much volatility are you comfortable with? If you can tolerate risk, more aggressive portfolios may offer potential for higher returns, but they also mean greater risk of volatility and potential for losses. Your time horizon, time until reaching your goal, and your willingness to take risk come together to form your investor profile, which ranges from conservative, seeking less investment risk, to aggressive, able to tolerate greater investment risk. Graphic: Chart depicting higher risk levels as portfolios transition from conservative to moderate to aggressive. Step three. Choose the asset allocation that helps meet your needs. Asset allocations can fall into one of five buckets, ranging from conservative to aggressive. The main asset classes in an investment portfolio are stocks, bonds and cash or money markets. Here are three sample portfolios from lower risk to higher risk. Conservative portfolio: 26% stocks, 58% bonds, 16% cash or money markets. Moderate portfolio: 59% stocks, 39% bonds, 2% cash or money markets. Aggressive portfolio: 88% stocks, 10% bonds, 2% cash or money markets. Merrill clients can use the Asset Allocator tool to determine an appropriate mix. Step four. Decide on your approach. Leave it to a professional? Go it alone? There are three basic options to consider when it comes to managing your portfolio, ranging from "On your own" to "With hands-on assistance." If you're very comfortable investing, you can choose your own securities. You can also take a middle-ground approach, choosing some investments on your own and some with an advisor. Or a Merrill Financial Solutions Advisor can help you assemble a portfolio that helps meet your needs. Learn about ways to invest with Merrill. Step five. Review and rebalance. Once you've selected your assets, you'll need to make sure that, over time, your portfolio remains in sync with your goals. Set a schedule, say every 12 months, to measure your actual investment mix against your target. Make modifications as needed, based on variation and any changes to your personal goals. If you're not careful, over time, portfolio drift can change your allocations. Regular rebalancing of investments can help you make sure your risk stays aligned with your goals and avoid being exposed to too much, or not enough, risk. Remember, investing involves risk, but especially in times of volatility, it's important to be prepared. Merrill can help you learn more about how to build and manage your investment portfolio. Logo graphic: Merrill, a Bank of America company.
Past performance is not a guarantee of future results.
Investing involves risk. There is always the potential of losing money when you invest in securities.
Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.
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