Creating an investment portfolio allows an investor to save and increase their funds effectively. However, to achieve the maximum effect, you must follow several principles for not only creating but managing your portfolio. For example, many people have heard about the need for diversification and risk management. But how can you do it correctly? In this article, we will discuss all the main principles of forming a balanced investment portfolio and the subtleties of managing it.

Any investment portfolio consists of three main stages:

1. Selecting the company is the initial stage of forming any portfolio, and this stage should never stop. Investors continually have to monitor companies and how they deal in the market. For example, Enron was one of the biggest companies in the USA, with 22,000 employees. In 2000 it claimed $111 billion in revenue but filed for bankruptcy in 2001. If an investor does not keep an eye on the companies he invests in, he might lose thousands.
2. Investing portfolio management: this is an acquisition of securities with accompanying fundamental and technical factors. An investor does not have to follow the rules of investment that he had learned from books. Yes, it is fundamental, yet the world is unpredictable. Portfolio management must be combined with these two factors. Based on the present world situation, the investor has to know how to reallocate his active investments. Portfolio management is the constant replacement of some elements of the portfolio with others in order to maximize returns and minimize risk.
3. After investors form their portfolios, the question of how to balance them rationally and profitably will rise.

Investment Portfolio Strategies for Creating a Well-Balanced Portfolio

There are five main strategies for setting a balanced portfolio, which are:

1. Set investment goals 
2. Audit the effectiveness of the portfolio 
3. Understand the risk tolerance
4. Rebalance the portfolio (if needed)
5. Check and monitor by using the best portfolio investment software

These five main strategies will help you to build the best investment portfolio.

Setting Investment Goals  

It is clear that the investment goals of a student and a mid-40s married couple are different. Yes, both want to increase profit, but the method chosen and how to use this money are different. Due to the minimum balance available, students might choose ETF, while a professional worker would choose mutual funds.

Indeed, some students might have huge savings, while a man in his 50s does not. Each individual is different, and that is why it is so important to set an investment goal individually first. Some strategies that worked for one person might not work on you because of risk tolerance. 

Our suggestion is to make an Excel balance sheet, in which you list all the assets you have and the stocks you want to invest in. 

HINT: Constantly update your balance sheet. It will help you to see the results of your investment, the balance you have started from, and your current assets. 

Audit the Effectiveness of the Investment Portfolio 

The investment portfolio should be regularly reviewed, as the market for financial instruments is very dynamic. The assets included in an effective investment portfolio must meet the changing economic situation and investment goals, as well as take into account changes in the quality of individual securities. Depending on the portfolio and the specifics of the investment, it can be carried out even on a daily basis.   

Understand the Risk Tolerance 

Before investing anywhere, an investor should evaluate:

• The possibility of occurrence and the size of potential risk for investment;
• The causes that contribute to the emergence of risk;
• Ways to reduce the probability of financial losses.

In any case, investment risks are the responsibility of the investor. The general rule of investment is that the less risk an investor is willing to take, the lower their potential return will be. But this rule often leads to incorrect conclusions that if you want to earn a lot, you need to take a big risk. This is an erroneous statement that has ruined many investors by depriving them of money. A very important factor to consider when investing is time and compound interest. These two ingredients turn small capitals into huge ones. On the principle of “investment + time + compound interest,” Warren Buffett grew his fortune from 25 cents to billions of dollars. 

HINT: do not invest in high-risk projects if you can’t deal with stress and risks. Your health is more important. Try to invest comfortably according to your risk tolerance. 

Rebalance Portfolio 

As aforementioned, even if the company is showing constant growth, you must check research reports and analyst feedbacks and reviews of specific companies. But, even famous accountants can lie; a great example is Arthur Andersen, who covered up Enron’s fraud, resulting in 85,000 people being unemployed when the public found out.

Always make calculations and do the research by yourself too.

Keeping the stock for decades can be useful but risky. Moreover, always check the tax that needs to be paid for keeping the same stock.

Check and Monitor the Best Portfolio Investment Software

A couple of years ago, investors had to wait for a month for the company’s account tables. Any investments were hard to observe. Luckily, the era of FinTech opened new opportunities for us. We can choose the platform for investment among a thousand apps. Choosing an investment portfolio app might not be easy. An investor has to choose the platform where he will be comfortable to use, easy and without hidden fees. 

Some platforms might even offer free brokers fees or free consultation; do not fall for each marketing trick that you see. A professional broker will not work for free, even if it is online. We suggest checking the Einvestment platform, as it is recognized in the market and has a highly professional investment team.

Conclusion

Strategies for forming a balanced investment portfolio may differ in their risks and the minimum amount to be invested. But each of them will be based on the form of the principles that we have mentioned: if you invest, you will one day rebalance portfolio or change the investment platform. At the same time, the investor must constantly analyze financial instruments and market trends and make active actions not too often, but deliberately.

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When investors start their careers, they learn a lot, test different strategies, and put their newfound knowledge into practice. However, not many of them think about the paths of other successful investors. Why should you read about them? Well, it lets you learn from the mistakes and successes of others – sometimes, you might even gain inspiration from their ideas. The list of investors who achieved the top of Forbes is enormous. Nevertheless, we will tell you about the most outstanding ones.

The Best Investors list: 6 leaders

1. Warren Buffett

$62.9B, CEO, Berkshire Hathaway

Of course, we couldn’t start with a different name. Warren Buffet is one of the most wealthy and successful investors of all time. His path was predetermined when he was at a dinner with his dad and a member of the NYSE. He was only ten years old but knew his life would be connected to money. 

Buffett made his first investment when he was only 11. He bought six shares of Cities Service for $38 each. When he turned 16, he possessed $53,000. How? He worked hard, delivering the Washington Post. Since 1969, he has been focusing on Berkshire Hathaway, the company that became a benchmark for successful investments. 

Reading is a key to his success. All the information Buffett’s needs for trading, he takes from newspapers. 

When evaluating stocks, he follows two rules. The first one is to know the company’s quality. So, you should check balance sheets and know everything about its management. The second thing is to evaluate the price of shares only after you are sure about the company’s quality. Thus, if the company’s condition isn’t great, don’t buy its shares-  even if they are cheap. 

Warren Buffett may be 89 years old, but his word means a lot for investors and global financial markets. 

What to learn: Warren Buffett can teach you to work hard but be thrifty. A fortune doesn’t mean you should waste all your money. 

Invest with trusted online investment platform

2. Stephen Schwarzman

$11.7, Chairman and CEO, Blackstone Group

Stephen Schwarzman’s career was built by climbing the corporate ladder at Lehman Brothers. When he turned 31, he took the position of the managing director. In 1985, he launched Blackstone Group, a company that focused on mergers and acquisitions. Later, it included leveraged buyouts. Currently, it operates with more than $470 billion in assets and trades. Twice within the last ten years, he was named one of 50 the most influential people of the year by Bloomberg. 

What to learn: Stephen Schwarzman teaches you that your career may start in one company where you will grow as a professional. But it doesn’t mean you have limits for your own enterprise. 

3. Carl Icahn

$21.5B, Founder, Icahn Capital Management

Carl Icahn’s career began in 1961 when he worked as a stockbroker on Wall Street. Nearly seven years later, he founded a security firm- Icahn & Co. Nevertheless, he takes leading positions in several companies to get voting rights. He owns shares of giant enterprises such as Time Warner and Yahoo.

Mr. Icahn is called a ruthless “corporate raider.” However, like any other investor, sometimes he suffers bad times. For example, his investment fund has been incurring losses for almost three years. Still, he continued buying shares in different companies. 

What to learn: Mr. Icahn can teach you to behave aggressively in the market. Be a lion, not a sheep. He said: “You learn in this business… If you want a friend, get a dog.” 

4. Bill Gross

 $1.5 billion, Cofounder and Co-Chief Investment Officer, Pacific Investment Management Company LLC

Bill Gross, also known as the “Bond King”, founded PIMCO and operated one of the most significant bond funds, the PIMCO Total Return Fund. He focuses on portfolio management. 

Mr. Gross said that if you really like a particular stock, put 10% or so of your portfolio in it. Make the idea count. Good investment ideas should not be diversified away into meaningless oblivion.

What to learn: Every newbie trader learns that diversification is a key to great benefits. Nevertheless, it’s also a risk to lose opportunities if one of the asset moves in your favor and others stay on hold. Investors should always have some money on hand for if they find an excellent opportunity, and their research ensures they will win. 

5. David Tepper

$11.6B, President and Founder, Appaloosa Management

Mr. Tepper is a successful hedge fund investor who has managed to get significant returns since the financial crisis of 2008. In 1992, he left Goldman Sachs and launched Appaloosa Management. He succeeded by investing in company strategies such as MCI and Mirant. The primary approach is a focus on distressed companies.

What to learn: David Tepper can teach you an exciting strategy. You can choose distressed companies and wait until their stocks recover. For example, in 2009, his hedge fund received nearly $7 billion on the recovery of distressed shares. 

6. George Soros

$24.5B, Founder, Soros Fund Management LLC

We started with one of the most famous names and will end our list with another legendary investor you have most likely heard about. It’s George Soros.  

Mr. Soros was born in Hungary, but when he turned 17, he moved to study in England. George worked hard to pay the tuition at the London School of Economics. 

His most famous deal is the breaking of the Bank of England. Somehow, he knew the central bank would devaluate the domestic currency and sold $10 billion in GBP. After the British pound plunged, he bought it back.

Mr. Soros was involved in plenty of scandals and controversial situations. He was charged for insider trading and may have participated in Thai baht speculations. His fund suffered millions of dollars in losses, but George Soros is still one of the world’s wealthiest people.

What to learn: George Soros never gives up, although he has gone through difficult times. If you want to be successful, you should have the strength to survive losses and unpleasant situations. 

Conclusion

In conclusion, to become a successful investor, you should learn about other’s mistakes and successes. The most practical examples are the wealthiest and most successful world’s investors. Combining their strategies and approaches, you can raise your chances of getting higher benefits. 

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There are a few markets that have enormous volatility, and stocks are among them. Although stocks are risky assets, they attract traders and investors worldwide. There are a vast number of books, articles, and guides available – which can just end up confusing investors. To earn a profit, you should obtain reliable help with investing from an online broker. Before we move to the qualities of the best stockbrokers, let’s consider other options.

Robo-Advisor

Robot advisors became popular after the financial crisis of 2008. Their popularity grows daily, along with their accuracy. More and more companies program and use their robots to attract new clients. Relying on the Charles Schwab Corporation, an American multinational financial services company, the number of American Robo-users will surge by 58% by 2025. Aite Group predicts the number of people using robots while trading and investing will rise from about 2 million to 17 million by 2021.

At the same time, robots have some qualities that can become pitfalls for your professional growth as an investor.  

Guides and Books

It’s crucial to improve your knowledge and skills by reading and applying experts’ wisdom. Your experience will help you trade without others’ help, relying on your background and feelings. However, this option isn’t a comprehensive one. Educational materials may become a great helper in professional growth. Still, to become an expert and make the right decisions, you need to practice.

Brokers

The easiest way to enter the stock market is to use brokerage services. Interest in stock investing grows continuously. Thus, demand breeds supply. However, not just any broker will fulfill your requirements. Let’s consider the factors that will help you to choose the best stock broker in the USA. 

Requirements for Stock Brokers

Know what you want. To choose the right broker, you need to know your goals. Firstly, determine the aim of investing (lots of investors save for retirement). Secondly, set a period. It can be either a short-term period (several years) or a long-term period (10-15 years). These questions will help you to understand what stockbroker account you need.

Trade or invest. Another essential point to understand is whether you want to invest or trade. These approaches are different. Investing is used to purchase assets and hold them for at least several years. Trading brings fast rewards, but it’s not a common way to invest for an extended period. Thus, you need to find a broker that will match your goals.

Type of broker. After you define your needs, you are ready to determine a stock broker for hire. There are two main types: full-service and discount. Full-service brokers are more expensive than discount ones as they provide a full range of services such as financial advice for every side of your life, including retirement and healthcare. Usually, the minimum size of the account is $25,000.

Discount brokers offer a more extensive range of options. Firstly, they allow you to make your own decisions regarding placing orders., they invent or buy Robo-advisors that ease the investing process. They also may give not only signals but educational information. And what is most important, the minimum deposit is really low.

Determine your level. The grade of your experience matters when choosing an online broker. Previously, we said you could use educational materials to improve your knowledge. However, a good broker provides educational materials too. Thus, no matter if you are a beginner or a professional, you can learn something new with your broker.

Stockbroker Platforms. A reliable broker should have a platform that works well in any version, whether it be via a mobile browser, a computer, or an app, as the main advantage of an online broker is its mobility.

Stockbroker fees. Stocks are not cheap. Just imagine that to buy one share of Berkshire Hathaway, you need approximately $272,000. Online brokers may provide leverage and accounts with a small deposit. It will allow you to invest even if you don’t have significant funds. However, before you open an account, read the terms and conditions carefully. Brokers take a commission for their services. Commission and fees vary significantly.

It seems it’s not easy to find a good broker. But believe that as soon as you succeed in it, your investing career will skyrocket. 

Benefits and Drawbacks

Stock Broker vs. Investment Banker

An investment banker is a professional who helps companies and individuals participate in huge deals such as mergers, sales, and security issuing. A broker is a bridge between the investor and the market. An investment banker is a professional helper who does the most significant part of the work for you.

Conclusion

To conclude, there are different types of stock investment help. However, online brokers are the most reliable and comprehensive. Brokers provide not only a platform for trading or investing, but also educational materials, financial advice, and Robo-services. They are responsible for your money. At the same time, it’s crucial to find a trustworthy brokerage firm. Remember that there are three essential qualities you should consider. They are a convenient platform, professional advice, and law control. Einvestment combines all of them. Start to invest with professionals. 

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Investing is not scary or difficult if you understand it. First of all, you need to understand with whom you have to work: the market is full of unscrupulous brokers. We have collected the primary information and created a simple guide for beginners so that you can figure out everything.

Popular Misconceptions

There are many misconceptions about investing: fraud, lottery, too complex, a topic that requires specialized training, and huge start-up capital. Not really.

First, you need to find a good broker with a state license, learn how to balance risks, read financial news, and create an initial investment portfolio. This might seem complex, but we’ll break it down for you.

Recession, crises, and pandemics are major negative factors that stop investing.

According to the International Monetary Fund, we will experience the worst recession since the Great Depression this year: the global GDP will drop by 3%. Indeed, some companies already had hit their lowest level for the past 3-5 years, according to the Dow Jones Industrial Average. 

For earning money, you do not have to study each company’s details for the past ten years. Just start from simple stock investing in things you already know. For example, because of the customer shift this year, Adobe stock rose by 4%, with revenue of more than $3 billion.

When Lehman brothers were filing for bankruptcy in 2008-2009, Amazon grew its online sales by 29%. Lego moved to Asia and Europe and managed to increase its profits by 63%, giving hefty returns to its investors. These real examples prove: investing in crises can be practical and profitable.

After 2008, we already have learned that with a reasonable strategy, and with no panic, investors can earn good money. Each collapse is always followed by a recovery period, which is provided by exchanges and commodity instruments.

Follow Our  Easy Guide to Investing In Stocks

Let’s take a closer look on how to start your investing journey. 

Step 1: Choose How You Want to Invest in Stock

If you are  interested in choosing stocks and funds by yourself

This is a responsible choice, but it might not be right for beginners. New investors should suppress the desire to buy everything that has fallen in price. They should keep in mind that the risks of increased fluctuations in the markets under the crisis can remain relevant, which is why short-term purchases, especially for newcomers, are risky in such conditions.

If You know funds and stocks are a great investment but prefer someone to do it for you.

Choose the investment service, broker, or adviser who will evaluate your risks and satisfy your investing needs. If you are not sure where to start, start with Einvestment mutual fund platform for investing. It is a licensed, multi-portfolio wealth management platform with professional management team that has more than 200 years of combined asset management experience.

You can build customized portfolio based on your needs and risk tolerance. Your strategy and goals may differ when you are in your 20s, 30s, 40s, and even 60s (such as retirement plans), but our investment portfolios will grow with you – which is just one of the many benefits of investing with Einvestment platform.

Step 2: Open an Investing Account 

Currently, the market is offering accounts with a broker or with a Robo-adviser account. 

With a broker, you can open an individual retirement account or a taxable brokerage account if you are already saving somewhere.

Robo-advisers were popular a couple of years ago. Currently, their prices have risen, but their analysis during crises is poorly designed. Broker accounts are safer during a pandemic, as the deals are analyzed by a person, not a robot.

Step 3: Choose between Investing in Mutual Funds or Individual Stocks during a Financial Crisis

Most people in the stock market choose between investing in mutual funds and individual stocks. Mutual funds allow you to buy a part of different stocks, which provides more diversity to your portfolio. If you like a single company, you can buy a couple of shares or a single share of it. 

As a beginner, try both. If you invest in an individual stock, do not jump too fast from one company’s share to another. 

Mutual funds are less risky and less likely to rise as individual stocks. Indeed, for the individual stocks, be prepared to invest and leave it alone for a couple of years to see real results. Jumping from stock to stock will not increase your assets. One great example can be Apple- Ronald Wayne might still regret it. 

Step 4: Allocate a Budget and Investing Limits

When you start investing, prepare emotionally and physically for the amount of money you are ready to lose. Many beginners fail to control their emotions. Ask yourself what your emotional tolerance is. 

Generally, the middle-age investor has 80% of their portfolio in stock funds; the rest would be the bond funds. The minimum amount to invest for an individual stock depends on the company you are interested in. We recommend investing no more than 10% in it. 

Note, if, during a financial crisis or pandemic, one company keeps losing its market share, even during the recovery, it might not go up. J.Crew, Gold’s Gym, and Diamond Offshore Drilling have already filed chapter 11 for bankruptcy this year.

Stage 5: Start Investing 

To become an investor, you have to invest. Learning all about bonds and stocks does not provide experience. Knowledge is power, but holding on to money and waiting for an economic upswing is not the right idea. At the end of the day, inflation may reach you, and you will lose more.

We suggest using your short-run individual funds to invest in a company that you are relatively confident about, or see the potential in. 

Conclusion

All of the guidelines listed above are dedicated to beginners who are hesitant about investing. We believe, everyone should invest in stocks, no matter what the state of the economy is. Beginners can start from low-cost mutual funds, as it does not require big assets, and it does not have high risks.

The most important rule is to establish emotional barriers, decide your risk tolerance, and seek an adviser. Nowadays, there are many online platforms that allow you to invest during a pandemic. 

Even during a crisis, it is not about how the investors fall, but how they bounce back. You can rely on this simple guide for investing, no matter what economic conditions bring you.

Good luck!

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At the peak of the global economic crisis in 2008, the little-known manufacturer of household chemicals, Reckitt Benckiser, earned 373 million pounds in one quarter. Along with company profit, those who invested in the industry got rich in record time. 

There is nothing unusual in this story – due to the crisis, people began to spend more time at home, and, thus, more time cleaning their living abodes. This is where the Reckitt Benckiser products and funds were needed. This is similar to the COVID-19 situation, in which face masks, soups, and even toilet paper suddenly became must-have products – letting investors and companies earn millions. 

Thus, a crisis is not always synonymous with bankruptcy. Wise investors and brokers can actually benefit from the economic recession by increasing their funds. Moreover, the crisis is a periodic phenomenon, but the money invested during this period can provide a foundation for stable income in the future.

How to Implement Different Investing Strategies During the Crisis

Let’s dive into some working strategies to remember.

Avoid the Buy-And-Hold Strategy

Today, buying shares and securities with the expectation that they will not be sold for a long time can be risky. This strategy works well when markets are growing steadily. Economist Gary Shilling advises keeping an eye on your assets as if they are a forest – tend the live, inflationary trees and chop down the dying, deflationary trees.  

In other words, be prepared to sell the failing ones at once and catch a trend, gaining the value. Schilling also recommends that you step back and take in the whole forest, rather than getting lost in the trees. So, use a keen eye to assess how the entire state of your holdings. 

Check Your Emotions at the Door

Investments can be very stressful. Thousands of people are making the mistake of playing with stocks under emotional distress. If you catch yourself being too sensitive to constant changes, dividend stocks can be an option. Such stocks create a passive income. 

Focus on already stable companies that have had dividend payouts for at least 25 consecutive years. That could be one of the best investing strategy for stocks under the crisis and recession. Hint: try to look for companies with low debt-to-equity ratios.

Stop Trading Overactively

It is hard not to keep your eyes on the scoreboard every hour of the recession. Focusing on short-term share-price rather than company value can be a mistake. First, try to find what caused the event. Quantitative investing strategies based on discipline could be one of the ways to predict and analyze such events.

It is designed to collect all the “right” decisions in the business with the fastest computers. If the right inputs are nimble enough, it can predict the abnormal market events and save your money based on quantitative data.

Investment Diversification in 2020

Let’s face it, 2020 is one of the most unpredictable years over the past decade, and likely in the next decade, that’s to come. We’ve prepared some strategies on how to make your money work for you, even with all past and future events considered.

Safe Haven Assets Security from the Default

Keeping safe-haven assets might be the best investing strategy for retirees and new investors. Safe-haven assets allow investors to “weather the storm” – the figurative storm being times of volatility in the market. Such investments are considered to be safe under any market condition. As an example, gold, T-bills, and defensive stocks usually offer protection under the market downswings.

Study Consumer Cyclical Trends

Carefully study cyclical consumer trends, as they heavily depend on economic conditions and the business cycle. Automotive, housing, entertainment, and retail are all parts of this area. 

In April 2020 alone, home sales dropped by 18% due to COVID-19, while Netflix stocks increased by 14%. The reason is as simple as in our first example: people are limited to travel and even work, but they have more free time at home. 

Money Market Accounts and Saving Accounts

Both can be a short-term strategy solution for investing. A savings account is paid much better than a checking account due to the bank paying you back a percentage of your savings on a regular basis. 

It is a highly liquid account, and you can add more money to it if needed. In the short term, there is no risk of keeping money there. But in the long-term, your account can be affected by inflation. That is why saving accounts are not the best investment strategies for retirement. 

Money Market accounts are similar to saving accounts, but they require a higher minimum investment. Be sure to find the FDIC-insured money market, so your deposit will be protected from losing money. Similar to saving accounts, due to the liquidity, money market accounts are losing to the inflation rate, but both can be a good strategy for 2020. It is better to make money work than to keep it under the mattress.

How to Predict the Market Trends

Can market trends even be predicted? Officially, all academics say “yes.” Any company’s future has already been experienced by brokers and investors in the past. Only “unforeseen” events will cause price stocks to change. But what are they?

Even COVID-19 cannot be called a black swan, as it was predicted. Indeed, no one wants to risk their own money. If you feel emotionally distressed, unsure about stocks, and lost under current market conditions, try and consult with Einvestment. Enjoy the licensed platform with user-intuitive design and access to major high investing products. If you are looking for high-end investing options, Einvestment offers precisely what you need.

Conclusion 

Despite the ongoing global health crisis, there are still many ways to keep and increase your assets. According to GlobalData, we as a society are already changing to “online” base behavior. 

The most important takeaway is to keep one eye on trends to increase your assets and another for saving your money. Remember, even in 2009, when all companies were shut under crisis, Whatsapp, Uber, GV managed to become successful start-ups. Sometimes it is not about the stock numbers, but, rather, using common sense and inspiration. 

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