Everything you need to know about online portfolio investment.

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online portfolio managementWhat does a portfolio investment look like? A portfolio investment is a grouping of financial assets, where investments are made across several products with the aim of earning a return. It is a form of passive investing, either managed directly by the investor themselves or by a financial manager on their behalf. Portfolio investment is distinct from direct investment, which is when a significant amount of stock or security is bought in an individual company. Portfolio investments can contain a wide array of assets, which include stocks, government and corporate bonds, exchange-traded funds (ETFs) and mutual funds. They may also comprise actual physical products, such as commodities and property.

Portfolio investment management

The way a portfolio is composed depends on a number of factors based on an investor’s individual needs. These include what you’re investing for – such as for your retirement, your risk tolerance – how safe or adventurous you want to be when it comes to your money, how much you’re looking to invest, and for how long. Let’s break these factors down further:

The amount you’re investing

If you’re a young investor looking to invest a relatively small amount, your portfolio is likely to be made up of mutual or exchange-traded funds. These are a less risky option and you’d be less likely to lose money, especially if investing in the long term. Conversely, portfolio investments for someone with a high net worth will typically include stocks, bonds, commodities and property.

To risk or not to risk

What your portfolio investment looks like will greatly depend on how much risk you’re willing to take. A more daring investor may have a portfolio consisting of stocks, property, options and international securities – these are likely to give a high return but all come with substantial risk. If you prefer going down a safer route, you’ll opt for government bonds and stocks in established companies instead.

How much time you got?

The amount of risk that can be put into your portfolio investment also depends on your investment goals and how long you’re planning to keep your money invested. If an investor is young and saving for retirement, they may be able to include a few riskier options as their portfolio will be able to ride out any fluctuations in value thanks to a longer time horizon. On the other hand, if you’re an investor close to retirement age, you may not want to allocate large amounts of money to riskier growth stocks. Indeed, a more conservative approach is recommended the closer you are to your investment goal.

Online portfolio investment managers

In recent years there’s been a huge rise in the number of online investment managers – or robo-advisors as they’re commonly known – who will create and manage portfolio investments on your behalf in exchange for a minimal fee. This portfolio will normally be highly diversified and spread across a range of assets, companies, industries, and even countries to make sure it can balance out any risk or volatility in any particular area and maximise your chances of a higher return but also come with greater risk.

The online process

If you choose to use an online investment manager to build your portfolio, they’ll begin the process by asking you a series of questions to determine your goals and risk preference. They’ll then build a diversified portfolio based on your requirements. But it doesn’t end there. A good online investment manager will then periodically monitor your portfolio, rebalancing it as necessary to keep it in line with your needs. They will also reinvest any dividends paid out to you on your behalf. If your goals or risk preference ever change, you’ll also be able to adapt your portfolio to suit your new circumstances.