How Do You Create An Investment Portfolio?
Development of an investment portfolio must begin with a thorough understanding of the goals. Once the reasons for making the investment are understood, a portfolio will be constructed based on the client’s investment risk tolerance, timeframe and income needs. The impact of income taxes is also considered when constructing a portfolio and care is taken to try and minimize the income tax liability of a portfolio by placing higher income tax generating investments in tax sheltered accounts such as IRA’s and 401(k)’s. Choosing the proper asset allocation (the proportion of stocks versus bonds in the portfolio) is perhaps more important than choosing the individual investments. Once the asset allocation is determined then we generally recommend a diversified mix of low cost mutual funds and exchange traded funds for our clients. Many times the mutual funds are passively managed index funds because they typically have lower costs than actively managed funds and yet they frequently perform
