Diversification 101: building a balanced portfolio

In the magical world of personal finance, the skill of being able to build a well-balanced portfolio is one of the key strategies for achieving long-term financial success.

What is a portfolio? Essentially a portfolio is like a “collection” of investments owned by an individual or entity. It’s basically where you keep all your stocks, bonds, mutual funds, real estate or any other type of asset classes. The act of “diversification” is the act and the process of spreading investments across different assets. Diversification is essential, and it’s considered one of the fundamental principles in portfolio construction. The core of this strategy is to help investors to mitigate and minimise risks while maximising potential returns.

If you have never looked into investing before, words like stock, bonds and portfolios may seem daunting, especially if you happen to have limited resources and limited time. This being said, building a diversified portfolio is not only reserved for the wealthy. Individuals with minimal budgets and an already busy life can get started on the path to financial growth by adopting some effective yet simple investing strategies.

Getting started: understanding your financial goals

Before starting to build your portfolio, it’s very important to ground yourself, define your financial goals, and decide what you want your achievements to look like. Why are you building a portfolio? Are you looking to secure your future and save up and retire? Or are you looking to buy a house, go back to school or fund your education? Having clear goals and objectives is helpful to guide your trip and your investments, and will help you to decide what your risk tolerance looks like. Once you’ve established your goals, you can begin investing. I’ve gathered some tips and practical steps for beginners, including those with very low or no budget at all.

Education is always key

Knowledge is key in everything you do, have done or will do. Never overestimate yourself, overconfidence and greed are not a good match when it comes to “betting” your money on an investment or NFTs. Take your time, and once you think you’ve taken enough, take some more! Educate yourself about the different kinds of asset classes, risk profiles, and different investment strategies. The Internet and Google are your friends, you’ll find infinite online resources, books and many financial courses available. Having an understanding of the basics will empower you to make informed decisions and tackle the world of finance with ease.

Start small with low-cost investments

No shame in being broke, it is what it is. If you’re starting with a minimal budget the key is to start as small as possible. Many platforms will allow you to begin with a very low initial investment, sometimes as low as €10. Some low-cost investment options you might want to take into consideration are mutual funds, ETFs (exchange-traded funds) and index funds. These are options easy for beginners, and provide instant diversification by tracking a specific market index, thus spreading your investment across multiple assets.

Explore investment platforms

You might want to look into investment platforms. Many websites and online brokers are now offering trading at lower prices, allowing people like you to invest without having to worry about pricey transaction fees. It’s great news for people with limited budgets, as it lowers the barrier to entry.

Good news then! Beewise might be an interesting option for you then. Beewise offers different thematic options for you to look into based on your interests and values.

Choose what matters to you: When you set up your first investment goal, you’ll be able to explore different thematic options that align with your vision for the future. Whether you’re passionate about innovation, sustainability, environmental progress, or other key growth areas, there’s an approach designed to match your values.

Long-term growth focus: All investment options emphasize medium to long-term capital growth through diversified portfolios of equity and fixed income assets. Rather than chasing short-term trends, each approach focuses on sectors and companies positioned for sustainable development over time.

Start small, think big: You can begin exploring these different investment themes with as little as €10, making it accessible regardless of your budget. Each goal you create connects to one specific investment approach, keeping your strategy simple and focused while still allowing you to create multiple goals if you want to diversify across different themes.

The beauty of this approach is that you’re not just investing money, you’re investing in areas that genuinely interest you and align with what you believe will shape the future.

Build emergency savings

Before downloading one of these apps and diving right into investments, make sure you have an emergency savings fund set up and running. Financial advisors usually advise people to save up the equivalent of three to six month’s worth of living expenses, as a safety net. Having this cushion will allow you to navigate unexpected expenses without having to withdraw from your investments prematurely.

Disclaimer: This article has been distributed for educational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.