If you’ve read through some of the other articles in the getting started series or you’ve spent some time in the app already, you may well recognise the phrase ‘building your investment portfolio’. These words might feel a little abstract at the moment, but this article hopes to explain exactly what an investment portfolio is and the key things to consider when you’re building yours.
As always, these articles are here as a starting point for your own research and a helping hand on your investing journey – they are not advice (remember, Dodl doesn’t do advice 🤐).
What is an investment portfolio? 🤔
It’s the collection of different investments in your Dodl account. It could include a few different themed investments, a selection of shares, and maybe an AJ Bell fund or two just to round it out. That would be your account’s portfolio of investments – switch it around and you’ve got your ‘investment portfolio’!
How to build an investment portfolio 🧱
Neither Dodl nor this article can advise you on this, but there are a few general principles you can follow to help you choose your investments and get building.
Get to know an investment first
Like any long-term relationship, when choosing your investments, you’ll want to know what you’re getting yourself into. So do a little digging 🔎 – read all the info Dodl provides on the investment(s) you’re interested in and carry out your own research too. It doesn’t have to be super in-depth stuff (though go wild if you want to!), just make sure you understand the investment’s risks, and that you’re comfortable with these, as well as its potential for returns. Remember, past performance isn’t a guide to future returns – you’ll get used to hearing this!
The importance of ‘diversification’
‘Don’t put all your eggs in one basket’. Ahh a phrase you’ll get mighty familiar with when chatting about your investment portfolio to, you know, erm...other people with investment portfolios. 😆 All it means is it’s better not to rely too heavily on just one investment (or one investment theme e.g. tech), in case it takes a big hit in the market and struggles to recover - that’s a lot of pressure on one little investment/theme!
Instead put your eggs (your hard-earned cash) into lots of different baskets (a diverse range of lots of different investments). So if one or two investments dip down, well, it’s only a portion of the total amount you’ve invested which is affected. In other words, spread out your risk like a delicious omelette… okay, that’s quite enough of the egg analogies!! 🍳
Simply: diversification means creating a good mix of investments in your portfolio to reduce your risk (and hopefully maximise your returns). A diversified portfolio might have a broad range of investments of different types (e.g. shares, bonds, cash) from different industries, regions or currency.
Build up over the long term
Investing isn’t trading. Building up your investment portfolio takes time and, though you can make changes if you need to, it’s usually best to leave your investments to do their thing over the long term (5+ years). Invest more money when it suits your needs and check back on your portfolio intermittently, to make sure it’s keeping a good balance of different investments and still aimed firmly toward your goals.
Invest in what you believe in 🌲
You don’t have to leave your personal beliefs at the door when choosing your investments. In fact, it’s easier than ever to invest your money according to your principles, so you can build a portfolio which not only aims to grow your money but reflects your values too.
One way to do this is by investing responsibly – choosing investments with the heart as well as the head, so performance and returns don’t come at the expense of people and the planet. With Dodl you can choose from a range of responsible investments, including the AJ Bell responsible growth fund and themed funds, provided by our investment partners.
How hands-on are you feeling? 👐
When deciding what to invest in from the Dodl investment range and building your portfolio, besides considering the risk of the investments and checking their charges and other key details, make sure you’re comfortable with how much effort you’ll need to put in to build it.
The AJ Bell funds are ready-made investment options, built and managed by the AJ Bell experts – so you don’t have to! The themed investments take a little more self-building, as you’ll need to make sure you have a good diverse spread of investment themes in your portfolio yourself. And finally, investing directly in shares will need some work to research yourself to create a nice, balanced mix of companies.
Understandably, some people may not want to use their spare time researching investments, or they may simply prefer to have the experts take the lead. But some may want to take the reins entirely, hand-picking the themes and shares which meet their goals and needs. Wherever you sit on the ‘hands-on-to-hands-off’ spectrum, there are Dodl investment options out there (well, in the app 📲) for you.
Of course you don’t have to pick one or the other – you can invest across the entire range of Dodl investments! And although some investments are more hands-on than others, whatever it’s built from you’ll need to monitor your portfolio on an ongoing basis and make changes if you’re not hitting your goals or your goals have changed.
Ready to start building? 👷♀️
Though it can feel a bit daunting, this is the really exciting part. And, with Dodl, you’ll have all you need to choose your investments with confidence and build a diversified investment portfolio which reflects your values.
Nothing in this article should be taken as advice - Dodl doesn't give advice, but we do hope the info is helpful!