There is no shortage of tipsters around offering 'get-rich-quick'
opportunities. But if you are a serious private investor, leave the Las Vegas
mentality to those with money to fritter. The serious investor needs a proper
'portfolio' - a well-planned selection of investments, with a definite
structure and a clear aim. But exactly how does a newcomer to the stock market
go about achieving that?#
Well, if you go to five reputable stock brokers and ask them what you should
do with your money, you're likely to get five different answers, - even if you
give all the relevant information about your age, family, finances and what
you want from your investments. Moral? There is no one 'right' way to
structure a portfolio. However, there are undoubtedly some wrong ways, and you
can be sure that none of our five advisers would have suggested sinking all
(or perhaps any) of your money into Periwigs.#
So what should you do? We'll assume that you have sorted out the basics - like
mortgages, pensions, insurance and access to sufficient cash reserves. You
should then establish your own individual aims. These are partly a matter of
personal circumstances, partly a matter of psychology.#
For instance, if you are older you have less time to recover from any major
losses, and you may well wish to boost your pension income. So preserving your
capital and generating extra income are your main priorities. In this case,
you'd probably construct a portfolio with some shares (but not high risk
ones), along with gilts, cash deposits, and perhaps convertibles or the income
shares of split capital investment trusts.#
If you are younger, and in a solid financial position, you may decide to take
an aggressive approach - but only if you're blessed with a sanguine
disposition and won't suffer sleepless nights over share prices. If you
recognize yourself in this description, you might include a couple of heady
growth stocks in your portfolio, alongside your more pedestrian investments.
Once you have decided on your investment aims, you can then decide where to
put your money. The golden rule here is spread your risk - if you put all of
your money into Periwigs International, you're setting yourself up as a
hostage to fortune.&