How to start building your investment portfolio

Your portfolio contains any investments you’ve made, such as shares, bonds and property. It’s common for a portfolio to include such a mix of asset types. 

You likely already have an investment portfolio. Your superannuation is invested in a range of asset classes. 

Many people build wealth independently of their super with a separate investment portfolio. For Australians, property and shares are the most popular investment assets. 

The decisions you make about your portfolio now could very well pay off in five to 10 years. In most cases the longer you invest in an asset the better, as time can smooth out fluctuations in markets and the value of investments tends to build over time.

With that in mind, we’ve put together some ideas for kick-starting your investment portfolio.

Easy ways to start building your portfolio

If you’re new to investing, you might be feeling a little nervous about picking which shares to buy. A simple way to start building your portfolio can be to invest in a managed fund or exchange-traded fund.

Managed funds

Managed funds are slightly different from shares. In a managed fund, money from individual investors is pooled together and managed by a fund manager who makes the buying and selling decisions.

The funds might be used to invest in a single asset class such as shares, property or bonds, or can be used to invest across multiple asset classes or multiple geographic locations. This all depends on the underlying investment strategy of the managed fund you go with. So make sure to research funds you are considering investing in, to find one that suits your needs and appetite for risk. You can also invest in shares on your own – in fact, it’s common for a rounded portfolio to include a mix of managed funds and shares.

Find out more about managed funds with ANZ

Exchange-traded funds

An exchange-traded fund (or ETF) is another type of investment. It can be bought and sold on the stock exchange – kind of like shares.

An ETF can allow you to invest in several different asset classes or companies in one trade. When you invest in an ETF you could buy stocks in multiple companies within a certain industry, such as healthcare, or in a particular currency, such as the Australian dollar. 

Another common choice among ETF investors are those ETFs that track a market index such as the S&P/ASX 200 or a certain commodity, such as gold (they can mirror these investments without needing to hold the actual asset). Unlike a managed fund, an ETF isn’t always actively managed.  

Find out more about ETFs with ANZ

Choosing your own shares

If you want complete control in building your portfolio, choosing your own shares is one way to do it. Perhaps you’ve done some prior research and know exactly which shares you’re interested in, maybe you just want to retain the power to buy and sell yourself, or you’re already well-versed in how to trade.

The shares you buy will depend on various factors, such as how much you want to invest, the kinds of companies you want to invest in, your financial goals and how much risk you want to take on (your risk appetite).

Your share investment might be intended as a long-term commitment whereby you can earn steady returns. In that case, you might want to invest in well-established (or ‘blue chip’) companies that are generally considered to pose less risk. If you want quicker returns you might be willing to risk money in speculative companies, where the share price can be volatile.

Regardless of your risk appetite, when you’re choosing your own shares it’s best to invest diversely across different companies and industries. This means that when certain shares do well they can offset potential losses from other shares. In other words, don’t put all your eggs in one basket. Keep in mind that even with a diversified strategy, in a widespread downturn such as the global financial crisis you can incur big losses. But in the long term share investors tend to make gains. 

Doing your research

There are a few different avenues you can take to bring yourself up to speed on the world of share trading.

The sharemarket is heavily influenced by economics and changes in other markets, so it’s worth brushing up on the Australian economy (if you’re buying Australian shares), international economies (if you’re buying shares in foreign companies), exchange rates, government policy and any information specific to the industry you’re investing in. 

You can access share prices, market news, and more through an investment platform such as ANZ Share Investing (Applications for ANZ Share Investing accounts will close on 1 July 2022). You can even go deeper and read individual company reports or stay up-to-date with company alerts so you know more about the businesses you’ve bought shares in. If you already have in depth knowledge in some companies or sectors this could inform your investment decisions.

We’ve put together a guide explaining things to think about before you start share investing and we’ve also got a guide on getting started with $1000.

What to look out for

It’s important that you’re aware of the risks involved with investing in shares. While there’s potential for significant financial gain, there is an equal risk for hefty losses and you can lose some or all of the capital that you have invested. Make sure you do your research, start out by investing in funds or companies that you feel comfortable with, and only invest money that you can afford to lose.

You should look out for red flags, including companies that haven’t made any profit, have significant debt or are under investigation. You should also be wary of stocks that have consistent drops in value over the past three to five years.

Naturally, investing attracts a lot of queries. For more information on ANZ Share Investing accounts and other commonly asked questions, make sure to check out our share investing FAQ.