Take into account the profits and the risks possible:
The first rule to apply when you create your stock market portfolio is to know the duration over which you wish to invest. This is what we call the ‘investment horizon’ in financial terms.
It is well known that the longer term investments are generally the more secure and short term investments more risky due to their exposure to the psychological effects of the market.
In all cases, if you still prefer to invest over the short term, go for monetary funds that are less volatile. You will also need a fairly substantial investment capital to generate real profits. For long term investment, stock market shares are generally a good choice.
Finally, it is recommended that you decide the level of risk that you are prepared to accept. The most cautious investors will generally opt for State Bonds and the more adventurous often prefer the higher profits generated by derivatives or shares.
The most profitable assets and the riskiest:
When you create your stock market portfolio, it is best to vary your assets by choosing both shares and UCITS. In this way you can balance high but risky profits with lower but safer profits. Generally speaking, the higher risk assets are:
The less risky assets are:
- Convertible bonds
To minimise the risks while still enabling the opportunities for high profits, you will need to diversify your investment portfolio as much as possible by choosing both risky assets and more secure assets.
In the same way, if you have decided to invest in stock market shares it is better to choose shares in various companies from different sectors of activities to limit the risks related to the falling of any one particular sector and thereby compensate any losses with profits from other sectors.
The capital required for a good stock market portfolio:
To diversify your stock market portfolio it is however necessary to have a fairly significant capital investment; below €2,000 it is difficult to vary your assets.
Before launching yourself, you should think carefully about the capital you can invest according to your ambitions and investment horizons. But be careful you do not make haphazard choices as you should also be aware of the risk factor.
To summarise, creating a stock market portfolio is a step that requires reflection and must be based on an investment plan over the long term. Do not hesitate to ask for advice from your intermediary in case of doubt.