Asset building is open to people within the age range of 22 – 55 years, it is essential to start early enough in this journey of financial freedom. Suze Orman once wrote, “A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life”, asset building provides a platform to create a fortune and live a happy life.
What is an asset?
An asset connotes an object, title, or property that holds a certain amount of value which can be converted to cash. It is usually owned by a person or a company.
What is a portfolio?
A portfolio is a pool of monetary investments inclusive of bonds, commodities, stocks, and cash usually held by an individual or company.
What you should be aware of before planning your asset portfolio
There are certain measures to be taken into consideration when developing your asset portfolio. Depending on the assets classes you’re interested in, it may be imperative to involve the expertise of a financial advisor who can provide clear information about general do’s and don’ts, exposure to market unpredictability by estimating your level of risk tolerance. Investors are typically categorized into two groups depending on their risk tolerance level i.e. conservative investor and risk-tolerant investor.
The conservative investor will prefer to opt-in for portfolios with broad cap value stocks and broad-based market index funds. While the risk-tolerant investors can easily opt for low-cap growth stocks to large-cap growth stocks when looking at stocks and commodities. This parity may also be extended into which asset classes you may find more appealing for your strategy.
A good number of factors influence the risk tolerance level of an investor i.e. financial stability, age, size of their existing portfolio, and investor’s personality. This risk tolerance behavior may regulate a number of factors including the size, objectives, and time-frame of the investment.