The beginner’s guide to managing your own investment portfolio (2024)

Thinking of taking your first steps into the world of investment? Knowing exactly where best to place your money and how exactly to optimise it can feel like an overwhelming task, so it’s little wonder that many turn to the professionals for help, entrusting them with their hard-earned cash in the hopes of turning an impressive profit.

But much of the investment industry is in the business of making things sound more complicated than they are, which can often leave you feeling inadequate and ill-equipped to handle your own portfolio – when actually, you could easily be overseeing the process yourself.

While trustworthy advice from a reputable advisor will always come in handy, it doesn’t necessarily guarantee you optimal returns, and taking the time to learn how to handle your own portfolio and use the same allocation techniques as the professionals could save you a lot in expensive fees in the long-run. Doing so will allow you to remain in full control of your own finances, too – it’s just a case of knowing how and where to start.

Learn the basic investment principles

With a plethora of different investment methods out there, the thought of taking the plunge can feel a little overwhelming – but taking the time to learn about some of the simplest ones will soon have you on the road to success.

Whilst some of the more complicated systems do have their virtues, they certainly aren’t imperative for your success. One of the best ways to start getting your head around how the pros do it is to take part is by social trading – which allows investors to observe the trading behaviour of their peers and expert traders and to follow their investment strategies using copy trading or mirror trading. If you can follow the recipe that is set out for you, then you can’t go too far wrong – and it’s a great way to start learning the ropes early on with minimal risk.

Many trading platforms focus on sophisticated yet low-key index investing strategies that require the purchase of just a few index funds to get started, and you need only rebalance your portfolio once a year.

Identify the portfolio plan that’s right for you

With a range of portfolio plans to choose from, it’s important to take the time to work out which type will best meet your requirements, and ultimately, help you to achieve your financial goals. You’ll need to study the charts and look at the long-term returns and deepest drawdown, amongst other key data points, as these will help to inform your decision.

Do your own homework, too; invest in some books and read up on the best and most effective plans, and ensure that you gain a thorough understanding before making your choice.

Make use of the interactive charts that many trading platforms offer, too – and get to understand how changing up a few variables can influence the end result. You might not feel ready to dip your toe into doing so at this stage, but ultimately, the deeper your understanding of how trading works, the better.

Purchase your index funds

A brokerage account is essential if you wish to buy stocks and shares, and serves as the intermediary, where your funds are held. A good brokerage will do all of the hard work for you so that you don’t have to call up individual companies to make your investments, so be sure to go with a reputable one for minimal hassle or stress.

Once you’re all set up, it’ll be time to purchase the necessary index funds for the portfolio type you have opted for. This is usually a combination of assets including Total Stock Market, World Stock Market and Intermediate Term Bonds – though the quantities will vary. Each comes with many different index fund options, so do your research and shop around to find the one with the lowest cost. Bear in mind expense ratios and trading fees, as these can influence the overall cost.

Play the long game

Managing your own investment portfolio requires time and patience, so don’t be hasty in your decisions. Start simple, with a total stock market or large cap index fund, as these will make it easier to diversify your portfolio later down the line.

Markets will go up and down all the time, so don’t lose your nerve if things don’t go your way immediately. Your asset allocation will passively protect and grow your money of its own, so don’t be tempted to interfere too often once your educated decisions have been made.

Once a year, you’ll need to rebalance your portfolio, to ensure that things are still heading in the right direction for the long-term. If any of your assets have deviated from your target percentages, it’s time to make some tweaks.

To do this, you can either purchase some new shares of these funds with your own money, or sell shares of those assets that have performed well in order to do so. Ultimately, the choice is yours, but this will set you back on track.

Whilst it might sound complicated, with a little research and reading up, managing your own investment portfolio can be fun, rewarding and hugely successful. Take the time to learn the ropes, and you could be multiple quids in in years to come.

Please note: We need to make it crystal clear that LLM – Luxury Lifestyle Magazine are not financial experts, and this article should not be taken as professional investment advice.