Financial Times FT.com

Building a portfolio

Published: November 11 2005 15:08 | Last updated: November 11 2005 15:08

Whatever your attitude to risk, it is sensible to spread your portfolio across investments of different risk classes.

	Tip Index tracking funds or general international funds make a good base for a portfolio to which you can add more specialist funds investing in particular areas.

Click here to see charts that give some examples of what approach you might take using investment funds as your main portfolio building blocks for three risk levels: low, medium and high.

Wealth warning: this mix of funds is not intended to be definitive. It is one example, among many, of how it is possible to create portfolios based on different risk assumptions. If you want advice specific to your needs, you should consult an independent financial adviser or IFA.

Investment style

There are plenty of investment styles and models that you may want to follow as you build your portfolio. They can be largely categorised as value, growth and momentum.

Value investors look for cheap shares that they believe are undervalued and will eventually rise.
Growth investors look for companies with a record of, or the potential for, strong growth in earnings or revenue.
Momentum investors look for a strong trend and follow it.

Fund managers generally follow one or other of these styles, but may switch between them depending on their view of which will work best at different stages of the economic cycle.

Investors with strong views about which approach works best may want to stick to one particular style. Otherwise, it is a good idea to put together a combination of funds with different approaches.

	Tip Review any existing investments you have before making any new ones. Use the portfolio tool to monitor your investments and measure the risk you are taking.