Building up a Portfolio

Topic Covers | How to Build up, Profolio

So you've got your brokerage account and done exhaustive research on some companies you're interested in. Time to take the plunge. As a general rule, it's not a good idea to buy shares at the start of the trading day (currently 8.30am). Prices can be quite erratic owing to the way the big institutions buy and sell shares to each other.

You don't have to buy the shares all in one go. You can set up your phantom portfolio first and then gradually select stocks from the list, judging to see if the timing is right. It is an investment truism that you should buy on the dips and sell at the peaks. While this may seem obvious, share prices do tend to move in waves. After a period of rising prices, investors tend take some profits, and the share price can fall, even if there is nothing fundamentally wrong or changed about company. This is a good time to buy. The trend is still upwards, but you've managed to buy the shares when they were a little cheaper.

Of course, this theory only works when the markets are fairly stable. In volatile times, trying to time buying decisions correctly is almost impossible.

Income, growth or both?When building up a portfolio, it is also important to decide what you want from it. For example, if income is important to you, you should look for fairly stable shares that pay out high and growing dividends. The dividend yield figure (see earlier) is an important indicator of this. But really, if income is that important - if you're looking to supplement pension income, for example - you would probably be better off looking at alternative investments, such as gilts and corporate bonds. (These are explained in Part Nine.)

Investing in the stock market is really a capital growth game, whether you're a trader or an investor. What you have to decide is what level of risk you are prepared to take in return for what level of reward (These are explained in Part Eight.)

Monitoring your portfolio

In these days of computers and the internet, monitoring your portfolio has never been easier. Even if you don't have an internet dealing account, you can still see how your shares are performing on This is Money's portfolio service.Share prices are delayed by 15 minutes, but if you desperately want live prices, a number of other investment-related websites offer this, usually for a monthly fee.
Online portfolios will tell you how much your portfolio is worth, how much you've invested and how much profit or loss you've made. in many cases, portfolio valuations can be sent to you by e-mail or even fired to your mobile phone or personal organiser. In this way you can easily see which companies are performing well and which are doing badly. The difficult part is knowing is how to respond to the information you receive. This is dealt with in part 9.
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