Emily Clarke

5 Things You Should Have in Your Investment Portfolio

Investment portfolios include all the assets you buy or put money into to generate income or capital appreciation. When most people think of portfolios, they picture traditional stocks. While those assets might make up a big chunk of your portfolio, they shouldn't be the only thing you have.

The key to financial growth is diversification. Diversifying your portfolio can reduce your chances of experiencing significant losses while maximizing your potential for big earnings. But what should you have in your portfolio? What are alternative investments? What's the difference between a stock and a bond? Here's what you need to know.

Stocks

Stocks are small units of ownership in a publicly held company. They're what most people buy using a brokerage account when they first dabble in investments. While they can be high-risk, they can also pay off handsomely. Buying low and selling high can lead to substantial wealth.

Bonds

Bonds are less risky than stocks. Instead of purchasing company ownership, you're lending money to an entity. When you buy bonds, you earn interest until the entity pays it in full.

Exchange-Traded Funds (ETFs) and Mutual Funds

ETFs are a great way to spread out your risk. Funds are a collection of securities. You can buy shares of a fund and own a small piece of everything in it. Many types of funds exist, and your risk can vary based on what's in them.

Alternative Investments

What are alternative investments? These investments cover everything outside of traditional stocks, bonds and funds. For example, you can invest in precious metals, real estate, hedge funds and other niche commodities. Even cryptocurrency falls under the alternative investment umbrella.

Alternative investments can be higher risk but are a great way to diversify your portfolio.

Cash

Cash and cash alternatives offer a modest rate of return. It's always good to put some money aside in a certificate of deposit (CD) or high-yield savings account. You can also invest in mutual funds, allowing you to pool your money with other investors to purchase other commodities.

Author Resource:-

Emily Clarke writes about RIA and wealth management for financial advisors and more. You can find her thoughts at investment management blog.