How To Make A Well-balanced Investment Portfolio

Getting a good investment portfolio is something that everyone needs who
does any kind of investing. Having a good spread of investments is also a
good idea, in the event that one area of investments takes a loss. Here are
some tips about how to get an investment portfolio that is well balanced and
should enable you to weather most storms.

By investing in only one area of the market, you are more apt to run into a
larger loss if that part of the market does poorly during a given time
period. On the other hand, if you diversify enough, other profitable areas
can make up for poor growth in one area. This allows you to continue doing
at least reasonably well in some areas - in other words - all is not lost.

Diversify Into More Than Type of Market

A balanced portfolio will not resort only to trading in various types of
stocks, but should also include some items that are more financially sound,
even though they may not yield such a high increase. To your stock trading,
you need to include bonds, trust funds, and possibly even property. The
principal, simply stated, is that you do not want to risk losing everything.
Though the interest rates are not as good on the bonds, yet they are stable
and will provide a good hedge against loss - even in a rather economically
strapped time.
Trust funds do even better with interest than bonds, they are much more
stable than stock in general, but they also can have their bad days, too.

A general rule in investing in stock is that you should never invest more
than you want or can afford to lose. The reason is obvious - you could lose
it all. But by taking a percentage of your investments and dividing them up
between these various investment instruments, you should be able to gain a
much more stable portfolio, and still end up with some for retirement.

Market Transactions By Sectors

The market is generally made up of a number of sectors - each one consisting
of several groups of industries, and each one with their own share of
stability and instability. While one sector, such as telecommunications, may
not be doing as well as it once was, other areas may really be thriving.
Only by a constant watching of the market will you be able to discern these
developments, and know which one is worth investing in. A safer way to pick
stocks is to be careful what advice you receive (the best being those who
have successfully traded for years), as well as the means used to determine
which ones are "good investments."

Instead of just going out and buying the stock of a particular company, it
is a real good idea to use stock options. These "tickets" (my word for a
call option, or a put option) allow you to be ready to make stock purchases
or sales, depending on what you want to do. They can save you a considerable
amount of money and give you a window to see what may transpire with the
company you are looking at. For instance, if you buy a "ticket," and it
costs you $400, you have a window of opportunity that will give you a little
time to make your transaction. It is not an actual commitment to do so -
just a readiness. Instead of just going and buying that $5,000 worth of
stock, and possibly losing thousands, by using this ticket method, you may
only lose the cost of the ticket.

Learn the Options Available To You

When you want to create a really stable portfolio, it is a real good idea to
make a strong effort to learn all you can about the various techniques of
investing, understanding the stock market and mutual funds, as well as
products that you can successfully invest in. You may even want to invest in
foreign properties, such as in Costa Rica, or consider the FOREX (foreign
exchange) market.

About The Author: Joe Kenny writes for the UK personal finance sites
http://www.ukpersonalloanstore.co.uk and also http://www.cardguide.co.uk