What is a portfolio?
When you choose to start investing, you automatically begin building your ‘portfolio’. You can think of a portfolio like luggage — you have a backpack and you put in the things that are important to you based on where you are going, for how long and what you expect to happen in the future.
This example, though simple, contains some key points related to investment, so let’s break it down.
1. What will you put in it? The simplest way to think of this is which companies do you want to invest in. Later when you read about stocks, bonds, cash equivalents, or alternative investments — this is what you ‘put in’ your portfolio.
2. Where you are going and for how long? Your reasons for investing are important. For example, do you want to take a trip in two years, or are you thinking long term, without a clear goal so you rather invest and essentially forget about it for a while as it grows.
3. What do you expect to happen? Investing money has inherent risks involved. If you feel comfortable with taking the risk and have a longer-term investment strategy, then you might decide to invest in a wide variety of companies and financial assets.
This combination of decisions therefore makes up your personalised ‘portfolio’. Similar to your luggage, it is designed to meet your needs and take you where you want to go.
Kate Harris is a copywriter at MakeImpact, a Nordic Impact Fintech that helps individuals make sustainable investment decisions through their values.
