Understand Your Investment Choices
Having all the ingredients for success is a good start, but you won't get too far without the recipe. If you take all the ingredients for a delicious pastry and throw them together in equal parts, you'll end up with an inedible brick. Developing the art of measuring and mixing your ingredients so they work together to create investment perfection requires patience and diligence on your part. You need to figure out the delicate balance that will provide the most effective and productive investment portfolio for your needs.
Most investment portfolios consist of several components. Usually, they include some combination of the following: liquid assets (cash and equivalents), fixed income securities (bonds and annuities), equities (stocks), real estate, commodities (precious metals), and other investments.
Figuring out which securities will comprise your portfolio isn't a difficult process, as long as you apply the tried-and-true investment tenets: knowing your risk levels, having a fixed time horizon, employing investment diversification (through your asset allocation), and having set investment goals. Two of the more important factors in your portfolio decision-making process are risk and diversification.
