Your Investment Portfolio

Updated: Apr 7



tl;dr:
You can invest in different asset classes across public and private markets, and across debt (fixed income) and equity.
Your asset allocation—the amount of money you put into these different asset classes—depends on how much risk you want to take on and your time frame.
Diversification is the name of the game. Don’t put all of your eggs in one asset!

We want you to think about investing in terms of your whole portfolio—not as one-off investments. But what does this mean? To build a strong investment portfolio, you’ll want to consider the types of assets you can invest in, your asset allocation, and diversification.


Most important: you don’t need a lot of money to build your portfolio! Start small, and add to it along the way. You’ve got this!


Types of Assets

Public Equity

  • Stocks, mutual funds, index funds, ETFs

Public Debt (Fixed Income)

  • Government bonds, corporate bonds

Private Equity

  • Private equity funds, venture capital, equity crowdfunding

Private Debt

  • Kiva, peer-to-peer lending

Alternative assets

  • real estate (REITs), crypto, timber, art, wine

Cash

  • High yield savings account, money market account, CDFI


Asset Allocation

  • Income Portfolio: 70% to 100% in bonds.

  • comfortable with minimal risk and have a short- to midrange investment time horizon

  • Balanced Portfolio: 40% to 60% in stocks.

  • comfortable tolerating short-term price fluctuations, is willing to tolerate moderate growth, and has a mid- to long-range investment time horizon.

  • Growth Portfolio: 70% to 100% in stocks.

  • high risk tolerance and a long-term investment time horizon. Generating current income isn’t a primary goal.


Let’s build this one out a bit more. If you are looking to stay entirely in the public markets, your portfolio could look something like this: [pie chart]

  • 80% stocks

  • 20% bonds


Source: https://investor.vanguard.com/investor-resources-education/education/model-portfolio-allocation


Diversification within and among asset classes

Investing in different asset classes is important as you try to diversify your portfolio.


Throughout your portfolio, you want to have diversification. This is the idea of not putting all of your eggs in one basket, so you don’t put your money at too much risk no matter what happens in the markets. You can diversify your portfolio in a few ways: the first is by investing across asset classes. Typically, if the stock market goes down, interest rates and bond returns will start going up (or at least protect you from losing too much). You can also diversify by holding many different assets, be they stocks or bonds. Now, you could go choose a bunch of individual stocks, or you can invest in a fund. More on options for funds here [blog post].



Rebalancing and Benchmarking

To keep it simple, rebalancing is when you (or your investment manager) check in on your portfolio every once in a while and make sure your allocation is still where you want it to be. If the allocation has changed (say, your stocks have increased in value, overexposing you on the equity side), you would consider selling some stock and buying bonds to get back to your allocation percentages. There are tax strategies in play here, but we will save that for another conversation.


Lastly, whether you are hiring an advisor or managing your money yourself, you may consider tracking a benchmark.


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