INVESTOR EDUCATION
Building Your First Diversified Portfolio in Five Decisions
A step by step framework for a new investor: horizon, risk capacity, asset mix, contribution schedule and review cadence.
KEY TAKEAWAYS
- Horizon sets the risk you can carry, not your appetite for it.
- A regular contribution beats a perfect entry point.
- Review quarterly, act only on drift or a change in your life.
Decision one: horizon
Write down when you expect to need the money. Everything else follows from that date. A three year goal and a twenty year goal are different problems even for the same person.
Decision two: risk capacity
Risk capacity is financial, risk tolerance is emotional. Capacity asks what a 30 percent fall would do to your plans. Tolerance asks how it would feel. Build to the smaller of the two.
Decision three: the mix
Choose a split across equities, fixed income and a small satellite sleeve. Write the target percentages down. The written target is what turns later decisions into arithmetic instead of argument.
Decisions four and five: contribute and review
Set a recurring contribution you can sustain in a bad month, not just a good one. Then review quarterly against your written targets, and act only when weights have drifted or your circumstances have genuinely changed.
This note is published for information only. It is not personal investment advice, and the value of investments can fall as well as rise.