Stock Market Portfolio

By Stock Research Pro • March 22nd, 2011

Building your stock market portfolio can be an exciting and potentially very profitable endeavor for any investor who has decided to focus on stocks as an investment choice. A strong stock portfolio can enable you to build a significant nest egg for early retirement, fund college educations, or meet just about any other long-term financial goals you may have set for yourself or your family. However, poor planning and choices can lead to significant losses so it is important to develop a clear understanding of your risk tolerance as it pertains to your long-term financial goals.



Assess your Risk-Tolerance


Before buying stocks for your portfolio, you will need to determine the mix of stock investing alternatives that can deliver the returns you are seeking while managing risk exposure to a level that is tolerable for you. Investment risk refers to the probability that the return you will see from your investment will be less than expected. Your age, income-level, financial goals, and acceptance for volatility all factor into your risk tolerance. Please click the link below to take a quiz to help determine your risk profile.

Risk Tolerance Quiz


Develop your Strategy


Once you have a good handle on your tolerance for risk, you can start to build a stock market portfolio that will help meet your financial goals. Three of the basic strategies you might consider can include:

  • Growth Stock Investing- A growth strategy can be a good choice for invertors who have a long-term investing horizon and good tolerance for risk. Under this strategy, you will look for companies that seem promising for growth when compared with other companies in their industry or the market as a whole. Typically, these stocks do not pay dividends as your gains are realized through capital appreciation.
  • Income Investing- An income approach can be a good choice for investors who are looking for cash flow (through dividends) from their stock investments. Investors who are working within a shorter time horizon and those with a low risk tolerance might also consider this approach.
  • Value Investing- A value strategy is about finding stocks that look to be undervalued given the financial profile of the company. Value investing is a fundamental approach under which a company‚Äôs financial statements, management team, industry, and more are reviewed to determine suitability for investment.
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    The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

     

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