Strategies to Building a Financial Portfolio


Many people have their own ideas and goals on how they want to use their finances. Some desired to use it primarily for investments, while others tend to focus on savings at first. But regardless of what areas they concentrate on, it all leads to one major goal: having enough funds for their retirements and other personal endeavors. To control your finances and plans, you must create a complete financial portfolio.

As its name suggests, a financial portfolio is a collection of assets such as cash equivalents, cash, bonds, stocks, and alternative investments. It is, in fact, one of the best foundations used by most successful individuals. Curious how you can build your own financial portfolio? We listed a few steps that you should follow.

  1. Settle high-interest debt first

Debts can ruin not just your finances but your reputation as an individual too. If you have tons of pending high interest debts to pay off, then it’s doubtful that you can build a healthy financial portfolio. For this, you can utilize the debt avalanche method, wherein you’ll rank the debts by interest rate and decide how much you want to allocate for repayment every month. You can pay the minimums of the other debts and pay as high as you can to the top debt. If you’re planning to use this for your credit cards, be sure to not close your cards after paying for them, as it can ruin your credit standing.

  1. Fund your 401k and Roth IRA

Another important part of a healthy financial portfolio is building a good retirement fund. One perfect way to do that is through your 401k. If you are working for a company that offers matching contributions, then take advantage of it. The amount might vary, so it’s best to ask your employer how much they can contribute. Be sure to maximize your contributions to earn a much higher percentage return.

Aside from your 401k, make sure to maximize your Roth IRA. This individual retirement account isn’t just beneficial for building a healthy financial portfolio but also for your entire retirement stage. There are no minimum distributions, the withdrawals can be tax-free, and you can leave the money there for many years.

  1. Establish emergency reserves

With an emergency cash reserve, the benchmark is still three to six months’ worth of expenses. But another important thing you should consider is that it should be liquid as you’ll need to access the money in case of disaster. A reserve can help you pay for unexpected medical expenses, home repairs, or loss of a job. While most aspects of a financial portfolio are about return, cash reserves are for safety. One of the best ways to park your savings is establishing a laddered certificate of deposit portfolio through your local bank.

  1. Purchase a house

The next step to completing a financial portfolio is through buying a house. This particularly allows you to obtain equity from your previous expenses like rent, which you can turn into other loans. Instead of paying for rent, you are shelling out money on a long-term investment.

We highly recommend searching for a reputable private lender of residential loans if you need funds to improve the property. This is even more beneficial if you are looking to invest in more than one house and are planning to also sell or rent them out in the near future.

5.Explore different investments

Apart from investing in a home, opting for short-term and long-term investment instruments is also a great way to broadening your financial portfolio. Be sure to identify your risk tolerance to choose the type of investment tool. Some of the best short-term investments you can choose from include savings accounts, cash management accounts, money market accounts, certificates of deposits (CDs), and treasury.

As for long-term products, there are real estate investment trusts, stocks, mutual funds, and exchange-traded funds (ETFs). If your focus is on capital preservation, short-term investing is ideal. In case you are aiming for wealth creation, long-term investing should be your focus.

With tons of other financial responsibilities to think of, many often forget the importance of saving and investing, even in small amounts. But through creating a healthy financial portfolio, you can set yourself up for a brighter future and live the lifestyle you dream of.  Start building yours right now using our tips here and pair them with dedication and consistency.