Starting an investment portfolio can feel overwhelming. You’re making decisions that will shape your financial future, and there’s no shortage of advice out there. But here’s the good news: building a portfolio doesn’t have to be complicated. Think of it like constructing a house—you need a solid foundation, quality materials, and a design that fits your needs. Let’s walk through the steps to create a portfolio that works for you.
Knowing Yourself Is The First Step In Investing
Before investing, it is critical to know who you are as an investor. What are your personal objectives? If you will need money to purchase a home within the next 5-6 years, then that is completely different than needing to save for retirement in 25+ years. Your time frame is significant in determining how you should invest.
Also, consider your risk tolerance level. Can you see your investments decline by 20%, without becoming overly anxious? While some investors remain calm when markets fluctuate widely, others become extremely distressed, even over a very minor loss. Whether one is risk-averse or risk-tolerant, one must be true to their own self-assessment. It is essential to align your risk tolerance with your investment decisions and not let it conflict with them.
You must also look at your entire financial picture before making an investment decision. Do you currently work for a stable employer? How much debt do you currently carry? Do you anticipate receiving Social Security or a pension? All of these elements will help determine the investment mix that best fits you.
Mixing Your Assets the Right Way
Your asset allocation is the backbone of your portfolio. This is how you split your money between stocks, bonds, and other investments. Get this right, and you’re already ahead of most investors.
Stocks offer growth potential but come with greater volatility. Bonds are steadier and can provide income. Cash investments, such as money market funds, provide stability when you need it. Each plays a different role.
Here’s where things get interesting for modern investors. With the rise of digital assets, many people are exploring ways to add crypto to their portfolios. If you’re considering this route, you’ll need to think about how to hold these assets. Some investors prefer crypto wallets without KYC, like Best Wallet, Zengo, or Bitamp, because they value direct control and privacy over their holdings. These wallets let you manage your digital assets independently, though they require you to take full responsibility for security. It’s just one more option in today’s expanding investment landscape.
Your asset mix should reflect your goals and timeline. If you’re 30 and saving for retirement, you can probably handle more stocks. If you’re 60 and need your money soon, you’ll want more bonds and cash to protect what you’ve built. Interestingly, Baby Boomers started investing on average at 35, while Millennials started on average at 25.
Refine Your Mix
After you’ve selected a general stock-to-bond ratio, it’s time to get specific. For instance, you will want to have some equity in large, mid-sized, and small-cap businesses, as each group exhibits different market behavior under various conditions.
In addition, consider diversifying into both growth and value stocks. Growth stocks typically perform well over longer periods as they continue to grow at high rates (e.g., Amazon), while value stocks tend to provide greater stability as they often trade below their intrinsic value (e.g., AT&T). In 2025, 62% of Americans reported owning stock.
Furthermore, don’t overlook the potential of cryptocurrencies in your diversified portfolio. While crypto can be volatile, it has shown substantial growth over the last decade and can offer an alternative asset class with its own unique risk-return profile. Consider allocating a small portion to well-established cryptocurrencies like Bitcoin or Ethereum, as they may serve as a hedge against inflation and offer long-term growth potential.
Lastly, consider adding an international component by investing in foreign markets. While foreign investments can be more volatile than domestic stocks due to currency fluctuations and differing economic trends, international investing offers a much wider range of investment options within your portfolio.
As for fixed-income instruments, aim to create a diversified portfolio that includes government bonds, corporate bonds, short-term bonds, long-term bonds, high-credit-rated bonds, and lower-credit-rated bonds with potentially higher yields. The behavior of these types of bonds varies significantly depending on changes in market conditions.
Going Forward
Developing a portfolio is a continuous process. A portfolio should be designed to grow and evolve as you do. Develop your portfolio by creating a solid plan based on your investment objectives and risk tolerance. Develop a balanced portfolio consisting of a reasonable mix of asset classes. Once your portfolio is developed, it will be important to select high-quality investments to fill the various asset classes. A successful portfolio is not the one that generates the highest returns. It is one that you can maintain during both market highs and lows.
