Whether you already have a portfolio or are a complete novice to the world of investment, in order to achieve your ultimate aim, which in the majority of cases will be to save enough to enjoy a comfortable retirement, your prime target should be to put together a balanced portfolio.

Balanced Investment Portfolio

But what exactly is a balanced investment portfolio?  There is no clear-cut answer to this question; much depends on your individual financial circumstances, your age, employment status and how risk averse you are.  Other personal preferences will also play a part; you may wish to restrict your investments to stocks in companies with exceptional ‘green’ credentials, avoiding oil companies, for example.

At its simplest level, a portfolio made up of equal percentages of bonds and equities (stocks in companies) might be considered balanced.  However, the age at which you start to invest has a significant bearing on the precise ratio.  In your 20s and early 30s, the ratio of stocks should be higher; they are riskier, but the returns are better than bonds.  In your 30s to late-40s, the ratio should be adjusted to be closer to even; the risk element should be reduced somewhat.  By your 50s, the majority of your portfolio should be invested in bonds; government bonds being the absolute safest.

Stocks and bonds alone, however, are not necessarily the complete solution.  An experienced investment adviser is likely to suggest you should include other asset classes in order to achieve a truly balanced portfolio that will better reduce risk while maximizing returns.  Over the long-term, real estate tends to perform better than stocks; you own home counts, but you might also consider buying rental property, both residential and commercial.  Incorporating hedge funds and commodities will also help deliver a combination of growth and income while reducing exposure to the potentially volatile stock market.

Orkla Investor Day by The Orkla Group, on Flickr.  This work is licensed under a Creative Commons Attribution 2.0 Generic License.

Managing Your Portfolio

Putting together and managing a balanced investment portfolio in today’s fragile and volatile economic climate is a challenge, even for skilled professionals working in major investment management firms.  With that in mind, if you want to be sure that your hard earned money is being made to work as hard as possible, seeking advice from a company such as Fortress Investment Group is the way to go.  Responsible for managing some $66bn of client investments, the firm was founded in 1998 by its current principal and co-chairman, Wes Edens.  Having gained a B.S. in Finance at Oregon State University, Edens went on to become a partner at Lehman Brothers and partner and managing director of BlackRock Financial Management, Inc.

It is important to remember that you will never have a second chance to make your money work as hard as possible for you.  So don’t take any chances, find an investment management firm to suit you and let them take away all the hassle and uncertainty of personally managing your portfolio.