How to Invest in Portfolios

A portfolio is a collection of securities (financial products) that hopefully generate profit. You can either create your own portfolio of investments or invest in a mutual fund that maintains a portfolio that matches your investment goals. Shares of stock in publicly traded companies and government or corporate bonds are the two main securities that make up the bulk of most portfolios.

Instructions

Create Your Own Portfolio

1. Research the securities that you are interested in. The key to a profitable portfolio is filling it with reasonably priced investments in companies or products which you expect to continue to do well over a long period of time and that are managed by competent people.

2. Open a brokerage account. To buy most securities, including all stock, you need an account with a brokerage firm. The firm has a trading platform, which allows you to access products, and the firm's brokers are licensed to make the actual transactions. Dozens of reputable companies operate cheap, Internet-based services, and opening a brokerage account is as quick and easy as opening a bank account (fill out a form, sign, deposit the minimum balance, if required).

3. Buy bonds, stocks and other products through your brokerage firm's trading platform. The products you buy form your portfolio, and the money you put into them is your investment.

Invest in a Mutual Fund

1. Decide what you want to invest in. Mutual funds pool the money of thousands of small investors and collectively invest it into any number of things, giving each investor a portion of ownership in a large, diversified and professionally-managed portfolio. Different mutual funds cater to different niches; some have very safe investments, some mirror stock market benchmarks like the S&P 500, some invest only in eco-friendly businesses or high tech start-ups and there are hundreds of other options.

2. Research the mutual funds in your desired niche. CNN Money states that high performance funds rarely manage to maintain their performance and recommends investing instead in funds that have dependable, steady track records over at least a decade.

3. Open an account with a mutual fund. Mutual funds require investors to put in a minimum to open an account, which can be anywhere from several hundred dollars to thousands. Opening an account involves filling out paperwork or an online form and depositing the minimum amount.

Tips & Warnings

• Research your investment options thoroughly and be sure that you understand the risks involved before you purchase any security. Investment information service The Motley Fool warns that individual investors lose money when they invest without reading the fine print.

References

• CNN Money: Top Things to Know
• CNN Money: Investing in Mutual Funds
• The Motley Fool: Open and Fund Your Accounts
• The Motley Fool: Avoid the Biggest Mistake Investors Make
• The Motley Fool: Discover Great Businesses