When facing unpredictable financial investment risks, establishing a portfolio investment plan is crucial.
Portfolio investment doesn't hurt your returns. On the contrary, it indirectly increases your expected returns by reducing "diversifiable risk." Furthermore, if you establish a long-term portfolio investment plan, you can seize unexpected golden investment opportunities in the capital market and ultimately win.
Conservative Investment Portfolio
For risk-averse, or more conservative investors, a typical portfolio might be 60% bonds, 30% stocks, and 10% currency (or financial insurance). This high bond ratio enhances risk resilience and is ideal for those who cannot afford investment losses.
If investors have less self-control, they might consider converting 10% of their money market funds into financial insurance, such as retirement or children's education insurance, to further enhance their sense of security.
Active Investment Portfolio
For risk-loving, more adventurous investors, their portfolio might consist of 30% bonds, 60% stocks, and 10% gold. Gold plays a "gatekeeper" role in this portfolio, primarily providing a defensive purpose. Although gold doesn't generate profits or income, it can provide protection against asset losses during critical periods, thereby reducing overall volatility.
A Moderate-Risk Portfolio
For those seeking a balanced investment style, a simple and effective approach is to evenly divide your funds between stocks and bonds: 50% bonds and 50% stocks. This strategy delivers stable returns over the long term, reducing the risk of a single asset while also providing relatively stable returns during market fluctuations.
The implementation of a portfolio isn't just theoretical; the following will help you better practice it.
Ensure Asset Rebalancing
- Choosing an investment portfolio that works for you is an important step, but there's an even more crucial step: annual rebalancing. Because both stock and bond prices fluctuate, regular rebalancing can improve your portfolio's returns and reduce overall risk. This strategy helps investors maintain their desired asset allocation over the long term, resulting in more stable returns.
- Using an evenly distributed portfolio of stocks and bonds as an example, let's assume you initially have a 50% bond and 50% stock allocation. If the stock market experiences a downturn, resulting in a one-year asset balance of 60% bonds and 40% stocks, you'll need to sell some bonds and buy stocks to restore the portfolio to a balanced balance between bonds and stocks. Conversely, if the stock market performs strongly, causing the asset balance to become unbalanced, the opposite strategy will also be necessary.
Rebalancing not only saves time and effort but also provides investors with stable returns over the long term, thereby achieving steady wealth growth.