Elliott Wave Forecast Team
ElliottWave-Forecast.com
When it comes to create a financial portfolio, investors may have varying views and strategies based on their unique perspectives and goals. To choose financial instruments for a portfolio involves a combination of careful planning, diversification, and risk management. Therefore, here are some steps to help you create a solid financial portfolio:
Six steps to create a solid investment portfolio
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Define your financial goals: Start by clearly defining your short-term and long-term financial goals. This could include saving for retirement, purchasing a home, funding your children’s education, or achieving financial independence. Also your goals will shape your investment strategy.
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Assess your risk tolerance: Understand your risk tolerance by considering factors such as your age, income, time horizon, and personal comfort with market volatility. In other words, risk tolerance will guide your asset allocation decisions.
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Diversify your investments: Diversification is crucial for managing risk. Spread your investments across different asset classes such as stocks, bonds, real estate, commodities, etc. Additionally, diversify within each asset class by investing in various industries, sectors, and geographic regions.
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Choose suitable investments: Select individual investments that align with your asset allocation strategy. This could involve investing in mutual funds, exchange-traded funds (ETFs), individual stocks, bonds, or other investment vehicles. Consider factors such as historical performance, fees, fund managers’ expertise, and the investment’s fit within your portfolio.
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Monitor and rebalance regularly: Regularly review your portfolio’s performance and make adjustments as needed. Besides, some investments may outperform others, causing your asset allocation to drift from your desired targets. Rebalancing involves selling overperforming assets and reinvesting in underperforming ones to maintain your desired allocation.
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Consider a long-term perspective: Investing should be viewed as a long-term endeavor. Avoid making impulsive decisions based on short-term market fluctuations. Stay informed about market trends and economic factors, but make investment decisions based on your long-term financial goals.
Example of an investment portfolio
Asset A:
Asset class: U.S. Large-Cap Stocks (e.g., S&P 500 Index Fund) provides exposure to the U.S. stock market.
Allocation: 40%
Asset B:
Asset class: International Stocks (e.g., MSCI EAFE Index Fund) offers exposure to global equity markets outside the U.S.
Allocation: 25%
Asset C:
Asset class: Bonds (e.g., U.S. Aggregate Bond Index Fund) provides stability and income
generation.
Allocation: 15%
Asset D:
Asset class: Real Estate Investment Trusts (REITs) offers exposure to the real estate sector.
Allocation: 10%
Asset E:
Asset class: Commodities (Broad Commodity Index Fund) provides diversification and also potential hedge against inflation.
Allocation: 5%
Asset F:
Asset class: Cash provides liquidity allowing you to cover unexpected expenses or take advantage of investment opportunities that may arise. Also, It provides flexibility to navigate market fluctuations without being forced to sell investments at unfavorable prices.
Allocation: 5%
The specific asset allocations can be adjusted based on an individual’s risk tolerance, investment objectives, and time horizon. Therefore, this allocation example aims to strike a balance between growth potential (stocks, real estate, commodities) and stability (bonds).
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Editors’ Picks
EUR/USD hits two-day highs near 1.1820
EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY drops back below 157.00, as focus shifts to Japan snap election
USD/JPY is back in the red below 157.00 in the Asian session on Friday. The Japanese Yen recovers ground against the US Dollar amid some profit-taking ahead of Japan's snap general election on Sunday. The preliminary reading of the Michigan Consumer Sentiment Index report for February will be released later on Friday.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates Premium
The EUR/USD pair lost additional ground in the first week of February, settling at around 1.1820. The reversal lost momentum after the pair peaked at 1.2082 in January, its highest since mid-2021.
Gold: Volatility persists in commodity space Premium
After losing more than 8% to end the previous week, Gold (XAU/USD) remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000.
GBP/USD: Pound Sterling tests key support ahead of a big week Premium
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Bitcoin: The worst may be behind us
Bitcoin (BTC) price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
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