Co-founder of Affari Miei
January 5, 2024
How to build the investment portfolio ideal? I am sure that if you are reading this article you have asked yourself a question of this type and, for this reason, in the time we spend together I will try to provide you with the information necessary to understand which strategy is best suited to you.
Let’s start.
This article talks about:
Which path to follow for the ideal portfolio
To build your strategy you have several possibilities:
You delegate completely to the bank; You rely on some form of consultancy; Do it 100% yourself.
All three possibilities have advantages and disadvantages, I will delve deeper into the concept inarticle on financial advice you can find here. Here I can limit myself to saying that, in my opinion, relying on a form of banking management on the one hand frees you from the “burden” of having to think and act, on the other it exponentially reduces your control.
The other opposite, that is, doing it 100% yourself, is the solution with greater control and the cheapest but it is also the riskiest because, brutally, you have to know how to do it.
We, as Affari Miei, are in the middle: we provide information to those who want to maintain control but need guidance.
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Balanced investment portfolio
Long-term investing is almost always a balanced path in the sense that you have to balance the need for returns with the stability necessary to be able to “survive” all the seasons on the financial markets.
Although the concept is correct, in practice it often happens that it is distorted or used in a way that is not always clear: talking about a balanced portfolio in a bank, for example, almost always means everything and nothing.
Many managers, in fact, simply tend to understand the concept of “balanced” as a kind of blank delegation.
The classic example is mutual investment funds that have the denomination “balanced”: it is often difficult to understand the investment strategy, you sign a blank delegation without any possibility of control.
For those who wish to invest independently, the balance must be made between sectors (e.g. healthcare, tech, automotive, financial, etc.), between geographical areas (United States, Europe, Asia, etc.), between company capitalization (blue chips, small caps, etc.) and, above all, among asset classes (shares, bonds, raw materials, liquidity).
To build a good portfolio, in this case, you need to both diversify, that is, distribute your assets across multiple sectors, geographical areas and companies, and, above all, know how to decorrelate your investment by ensuring that a balance is created between checks and balances in able to survive all market crises unscathed or with limited damage.
The “classic” example of decorrelation it is gold that is often included in portfolios because it is decorrelated with the stock market.
Stock investment portfolio
A portfolio of investments in shares is often chosen by investors even though, from a technical point of view, it is the most complex path in terms of management.
Equity portfolios are often thematic meaning they span a specific sector, theme or geographic area.
For example, our stock model portfolios are:
#IOPUNTOSULLITALIA, which, as you can imagine, focuses on the best companies in our country; Smart Real Estate, or a review of the best REIT shares to invest in, therefore focused on the way of real estate investments;
Crypto Without Thoughtsthe review of the best shares in the crypto and blockchain sector;
Green4Futureor a review of the best actions of the green economy.
In these situations we focus on a geographical or sectoral level and aim for diversification both in terms of company capitalization and sub-sector.
Investment portfolio in ETFs
Investing in ETFs in my opinion it is the simplest and most effective strategy for long-term investing, if you are new to ETFs you can read the getting started guide.
The construction of an ETF portfolio must meet the same criteria as above, therefore a balance must be made between:
sectors; geographical areas; capitalization of companies; different asset classes that are decorrelated.
Here there are generally two solutions: either you proceed independently or you can rely on somewhat pre-set solutions such as model portfolios.
We as Affari Miei have created Fast Investments Plannerour investor club with which we mainly pitch model portfolios in ETFs.
Specifically, we have set up the following strategies:
Low risk portfolio; Medium risk portfolio; High risk portfolio.
Furthermore, depending on the version chosen, we also have thematic portfolios such as:
Megatrends; ESG; All Weather; Children and grandchildren.
Fund investment portfolio
The same criteria for building a stock portfolio can be applied to mutual funds and this is what is usually proposed in the bank.
This solution is, in my opinion, the worst because:
We have no control over the chosen funds which, 9 times out of 10, are created by the same bank; Management costs also reach 4% per year which, for example, out of 100 thousand euros invested produce a fixed annual cost of 4 thousand euros for the investor; The returns are often disappointing because they are burdened by the costs mentioned above and by the conflict of interest of the bank itself.
To learn more about these concepts, if they are new to you, I invite you to read this in-depth study.
What is the best portfolio for your investments?
There is no ideal portfolio, although the financial literature tries to propose “recipes” valid for everyone.
Much depends on your personal situation, your goals and your assets.
For those starting from scratch and with little capital, the solution could simply be to use the capital accumulation plan strategy to build a slightly more solid foundation.
For those who already have capital, one is necessary individual financial planning on the basis of which to then develop the strategy to be adopted on the markets. To about, I wrote an in-depth article here in which I clarify this concept in detail in case it is not known to you.
Here I can certainly tell you what the best wallet cannot be: the one they want to sell you at all costs, especially in the bank, in the name of a supposed “validity for all”.
Finance is personal precisely because investment choices vary depending on the person.
Portfolio analysis
Many companies offer the portfolio analysis service, especially banks often do it for free because it represents a mechanism for them to “disqualify” the existing portfolio and sell their mutual funds.
We as a society can carry out this service in a manner independent as they are not linked to the world of traditional managed savings.
If you are interested in learning more, visit the contact page where you will find the details to use our services.
Conclusions
In this article I have tried to introduce you to the basic principles to consider when building a portfolio.
I hope that the linked insights can complete the reasoning by providing you with the necessary support to orient yourself in the world of building your investment portfolio.
If you are new to the blog, I leave you with a series of preliminary resources to get you started:
I wish you a good continuation on Affari Miei.
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