Building your portfolio

As you gradually invest more money, you are building an investment portfolio. Your portfolio consists of all the different investments you own, ideally divided up to protect you from too much risk and increase your return over time.

You’ll probably need to start out slowly with just a few types of investments. But as you get older and may have more money to invest, eventually your portfolio could include a broad mix of stock and stock mutual funds, bonds and bond mutual funds, as well as cash and cash equivalents.

So how do you start creating an investment portfolio? Contrary to what you might think, you really don’t need lots of money to make your first investment. In fact, you might be able to do it with as little as $1,000. Your path to investing might start out something like this:

• Figure out your investing goal — it’s never too early to set long-term investment goals, such as a down payment on a home or early retirement.

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• Select an investment that may help you reach that goal. Sound daunting? One good way to do this is by finding an online financial site you’re comfortable with and learning as much as you can. There are also some excellent books for new investors that can help answer your questions. You can use these sources to research an investment’s history of prior returns, which can help you understand how much you might earn on the investment. You can ask a mutual fund company for a copy of a fund’s prospectus. You should also consider how risky a particular investment is — if you’re afraid to lose your money, you will want to avoid high-risk, high-return investments. Remember, usually the higher the return, the higher the risk.

  

• Open an account at a regular brokerage firm, online brokerage firm, bank, or mutual fund company, either on your own or with the help of a financial adviser. You may need a minimum of $1,000 to $2,500 to invest in some mutual funds, but you can make additional investments of as little as $50 with a direct deposit account. It’s smart to ask for recommendations from knowledgeable friends, family, and co-workers about where they invest.

  

• Track your investment by reading your statements online or in hard copy. Don’t expect instant results — the whole idea behind investing is to let your money grow over time.