How to Start an Investment Portfolio

Author

Edward Jones - Chad Choate, AAMS

Posted on

Jul 25, 2023

Book/Edition

Florida - Sarasota, Bradenton & Charlotte Counties

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Investments can play an important role in helping you achieve your financial goals. Building an investment portfolio, though, can feel overwhelming. There are so many different ways to invest and save for your future. Working with someone you trust and focusing on a defined set of steps, centered around what you’re trying to achieve, can make the process much easier and personalized to you.

Therefore, we recommend working with your financial advisor on these steps to building a portfolio:

  1. Identify your goals
  2. Weigh your comfort with risk
  3. Understand your time horizon
  4. Agree on an optimal portfolio mix
  5. Ensure proper diversification





  • What you would like retirement to look like
  • If you’d like to contribute to a child’s or grandchild’s education
  • If you plan make a large purchase, such as a home or a car
  • If you want to start a business
  • If you want to leave a financial legacy to your children or heirs

2. Weigh your comfort with risk

Assessing your comfort with risk is important because it’s unlikely you’ll reach your long-term goals if you abandon your strategy during the inevitable short-term market decline. Determining and periodically revisiting your comfort level with risk can help you avoid some emotional investing mistakes, such as chasing performance.

Growth investments, such as stocks or stock mutual funds, may experience more market volatility than more income-oriented investments, such as bonds or bond mutual funds, but can provide opportunities for higher returns. Appropriate diversification across quality, long-term investments can help align the risk of your portfolio with your comfort level. Finding that right balance can help you stay on the path toward your investment strategy. Typically, your financial advisor will ask you to complete a questionnaire that can gauge how you might react to risk in different situations. If you’re building an investment portfolio with your partner or spouse, this is an important topic to discuss with each other.

3. Understand your time horizon

You need to determine when you’ll need your money, which is directly related to your financial goals. Each financial goal will probably have a different time horizon. For example, if you’re saving for retirement, think about when you want to retire. If another goal is saving for college, your time horizon will be based on when your children will reach college age and how many years of school you plan to pay for.

Typically, the longer you have to invest, the greater your ability to make up for potential market declines, possibly allowing you to consider investments with greater return potential. As your time horizon shortens, we recommend shifting to more conservative investments that typically have smaller price fluctuations.

4. Agree on the optimal portfolio mix

There are risk and return expectations associated with each investment you choose. If an investment portfolio is made up primarily of fixed-income investments, it will likely have lower risk and lower return expectations. If an investment portfolio is more focused on equities, it will likely have higher risk and higher return expectations.

Investing is all about balance. For your portfolio, we recommend choosing an appropriate mix between equity and fixed-income investments based on your unique situation, starting with your comfort with risk, time horizon and financial goal(s). Considering additional factors such as your retirement income needs, existing savings and whether you want to leave a legacy can also help you decide the most appropriate allocation to stocks and bonds.

Evaluating how the risk and return characteristics of our portfolio objectives align with your situation can help you through this step in the process. This illustration can help you visualize the risk-return tradeoff as you move across portfolio objectives:

Source: Edward Jones

Source: Edward Jones

This graphic shows how your tolerance for risk (low, low to medium, medium, medium to high, or high) affects your portfolio objective at various periods in your life, from your early investing years to your later retirement years. So, for example, if you are in your high income and savings years (defined as having 15 years or less until retirement) and have a medium level of risk tolerance, your portfolio objective would likely be “balanced toward growth,” which emphasizes higher long-term growth and rising dividend potential, with a secondary goal of current interest income.

Source:  Edward Jones Investment Policy Committee. Growth focus: 80% stocks/20% bonds; Balanced toward growth: 65% stocks/35% bonds; Balanced growth & income: 50% stocks/50% bonds; Balanced toward income: 35% stocks/65% bonds; Income focus: 80% bonds/20% stocks; Preservation of principal: 50% cash and 50% short-term fixed income. Diversification does not guarantee a profit or protect against loss. Special risks are inherent to international investing, including those related to currency fluctuations and foreign political and economic events.

5. Ensure proper diversification

Once you’ve agreed on the mix of equity and fixed-income investments that aligns with your situation, we recommend building a portfolio diversified across a variety of asset classes. Asset classes are groups of investments that share similar risk and return characteristics. Since asset classes behave differently over time and it’s impossible to know which may be the best performer in any given year, having a diversified portfolio helps manage risk, creating a more solid foundation.

Our long-term strategic asset allocation guidance represents our view of balanced diversification for the fixed-income and equity portions of a well-diversified portfolio, based on our outlook for the economy and markets over the next 30 years. Our recommended allocation to each asset class depends on the mix of equity and fixed-income investments you have chosen for your situation, as defined by our portfolio objectives.

Source: Edward Jones

Diversifying within each asset class, not just across asset classes, can also strengthen the foundation of your portfolio. Within equity asset classes, consider investing in stocks representing different sectors or styles. Within fixed income, consider investing in bonds representing different sectors, categories or maturities. Mutual funds and exchange-traded funds (ETFs) can provide a convenient way to diversify your investments as you begin building your portfolio.

Start building your investment portfolio today

Making sure you have the right investment portfolio for your financial goals can be easier to achieve when you partner with the right financial advisor. Edward Jones will help you build an investment portfolio that aligns with your financial goals now and in the future. Together, we can define your investment portfolio objectives.

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Financial Advisor 828 3rd Ave. W., Bradenton, Florida, 34205

Hello, I'm Chad Choate a dedicated financial advisor in Bradenton, FL, I began my career with Edward Jones in 2017. As a financial advisor, I want to find out what's important to you and help you build personalized strategies to achieve your goals. As a lifelong Manatee County resident, I graduated from the University of South Florida and was a teacher in Manatee County before joining Edward Jones. My driving force is to change people's lives in a positive way, and what better place than my home to do that. Whether you're planning for retirement, saving for college for children or grandchildren or just trying to protect the financial future of the ones you care for the most, we can work together to develop specific strategies to help you achieve your goals. We will also monitor your progress to help make sure you stay on track or determine if any adjustments need to be made. Throughout it all, we're dedicated to providing you with top-notch client service. But we're not alone. Thousands of people and advanced technology support from our office can help ensure you receive the most current and comprehensive guidance. In addition, we welcome the opportunity to work with your attorney, accountant and other trusted professionals to deliver a comprehensive strategy that leverages everyone's expertise. Working together, we can help you develop a complete, tailored strategy to help you achieve your financial goals. I currently volunteer with the Manatee Hurricane football Broadcast and Booster Club, serve on my church's trustees council and have previously served as a leader in Young Life. I am a member of the Manatee Chamber of Commerce and an alumnus of their Leadership Manatee program. I have been married to my childhood sweetheart, Ashley, for 15 years and we have a son, Wesley, and daughter, Camryn. We enjoy watching our children play their sports and traveling as a family.