How to build an investment portfolio to avoid money losses and nerves

Home » blog » How to build an investment portfolio to avoid money losses and nerves

Investing is the first step towards a stable financial future. Building an investment portfolio is the foundation. It requires in-depth knowledge of financial markets, analytical skills and experience. Let’s take a closer look at it in this article.

Why an investment portfolio is not an ordinary collection of assets

To really understand what an investment portfolio is, it is important to realise that it is not just a handful of stocks and bonds, but a carefully calibrated system. It is like a garden in which every flower and tree plays a role. Stocks are like bright, fast-growing flowers that can yield a bountiful harvest but need constant attention and care. Bonds, on the other hand, are like sturdy trees that provide a solid foundation, stable income and protect you from financial storms.

Consideration of objectives and level of risk

The approach requires consideration of many factors: risk level, time to reach financial goals and desired returns. The key is to ensure that the foundation not only generates returns but is also fit for purpose, whether that is buying a flat, raising children or retiring early.

How to build an investment portfolio and avoid beginner’s mistakes

First you lay the groundwork: what do you want to achieve and over what period of time? Then you start choosing assets. Novice investors should avoid overly complex and risky instruments.

Common mistakes and how to avoid them

Step by step: define your objectives, select the right assets (stocks, bonds, funds, gold, real estate, cryptocurrencies) and analyse the risks. It is important to remember that each plays a different role:

Equities. They offer great upside potential, but can be very volatile.
Bonds. A stable, less risky source of income that offers protection in times of market turbulence.
Funds. Offer diversification as they cover many assets, reducing overall risk.
Gold. Traditionally considered a “safe haven” during periods of economic instability, retains value and reduces risk.
Real estate. Provides stable rental income and increases long-term capital growth.
Cryptocurrencies. A risky but potentially profitable asset suitable for a small part of a portfolio to increase returns.

A common mistake is to bet on just one type. Analysis of historical data confirms that diversified portfolios show greater return stability than portfolios consisting of one or a few assets. This is because different asset classes have different correlations, which lowers the overall risk level of the portfolio. It is therefore important to create a balanced and sustainable investment portfolio by combining different asset classes to minimise risk.

Portfolio diversification: how to reduce risk and maximise returns

The secret to a healthy investment portfolio is diversification. Imagine a box of sweets, where each candy is a separate asset. If one is not so tasty, the rest will manage. With diversification, you can reduce risk by spreading it across different assets: stocks, bonds, real estate, gold and funds.

Examples and benefits of diversification

This is especially important for novice investors who are not yet prepared for high volatility. If stocks fall, bonds or real estate can help offset the losses. Diversification is a strategic safety cushion that helps maintain a stable base even in the most unpredictable economic conditions.

What assets should be included in an investment portfolio for a successful start from scratch?

For the novice investor, selecting assets can be akin to putting together a construction kit. You should include a variety of “buckets”: stocks for growth, bonds for stability, funds for simplicity and maybe a little real estate. By including different types, you can minimise risk and build a flexible investment portfolio that suits your financial goals and capabilities.

Real examples of return and risk

Statistics prove it:

Equities can generate significant returns, but they are often subject to extreme fluctuations. For example, the S&P 500 index has a long-term average of around 10%, but some years can show both increases of 20% and decreases of 30%.
Bonds, on the other hand, offer stable but moderate returns. For example, the return on Russian government bonds is about 7-8% per year, which reduces the overall volatility of the portfolio.
Funds such as ETFs offer an easy way to invest, even with minimal investment, and have already proven their value. According to the Moscow Stock Exchange, Russian equity ETFs have grown 15% over the past 2 years, making them an attractive tool for beginners.
And real estate, especially commercial property, is steadily rising in price and providing rental income. Investment in commercial real estate in Moscow, for example, can yield around 10% a year.
Cryptocurrencies remain risky but potentially profitable assets. Bitcoin, for instance, rose 70% in 2021 and caught the attention of many investors. However, its high volatility requires a cautious approach and portfolio allocation based on risk.

It is best to start with conservative assets and gradually add riskier instruments to build a stable financial base.

How do you choose a broker to build your investment portfolio?

Choosing a broker to build an investment portfolio is an important step that is often underestimated. The main criteria are licensing, commission, ease of use of the platform and availability of research. Imagine the broker is a guide in the investment world. If the guide does not know the way or offers exorbitant prices for services, the journey is unlikely to be pleasant.

Platforms and their features

A licence ensures the safety of your funds and low commissions help you keep your profits. A convenient platform makes investing easy and accessible, even for beginners. Examples of such platforms include Tinkoff Investments, SberInvestor and VTB My Investments. Some brokers offer detailed analysis and training, especially useful for beginners.

Balancing your investment portfolio: what you need to know and do regularly

Balancing your investment portfolio is like maintaining your car: regular maintenance ensures it doesn’t let you down at a key moment. Core assets change in value over time and the original structure may be altered.

How to balance in practice

If stocks rise faster than bonds, the investment portfolio becomes riskier than expected. To avoid this, regularly review the asset allocation and bring it back to the target level. For example, if equities have risen and now hold a larger share, sell some of it and invest the money in more stable assets, such as bonds. This helps maintain an optimal level of risk and keep your investment strategy in line with your financial goals.

It’s time to take action: start your journey to financial freedom

Regardless of your age and financial situation, you can always find the right strategy and start investing now. A retiree investment portfolio can include conservative instruments that allow you to preserve your savings and receive a stable income. The important thing is to take the first step and then follow the plan with confidence. Financial freedom starts with a small but steady effort.

Инвестиции в сырьевые товары: особенности, стратегии, риски

In conditions of economic instability, currency depreciation, and geopolitical conflicts, investors’ attention is increasingly shifting towards tangible assets. One such segment is investments in commodities, which remain popular tools for capital protection, profit generation, and portfolio diversification. Commodity markets not only allow protection against inflation but also enable the development of a growth strategy, leveraging the cyclical nature of the global economy.

What are commodities and how is their market structured?

Commodities refer to physical assets extracted or produced for subsequent processing or industrial use. These include oil, gas, metals, grains, coffee, cocoa, and other agricultural products. The market operates through supply contracts, futures agreements, and spot transactions, with major operations conducted through exchanges such as NYMEX, LME, ICE, and others.

The heightened volatility in the sector provides both speculative opportunities and the threat of significant losses. Therefore, investments in commodities require a systematic approach, including analysis of macroeconomics, geopolitics, and seasonality.

Types of commodities: classification by categories

To understand the trading structure, it is important to categorize commodities. Below is a list outlining the main types:

energy resources – oil, natural gas, coal;
precious and industrial metals – gold, silver, platinum, copper;
agricultural products – wheat, corn, soybeans, cotton;
livestock – meat, dairy products, livestock;
strategic materials – uranium, lithium, rare earth elements.

Each category has unique demand drivers, seasonality, and pricing characteristics. This is why investments in commodities must consider the specific nature of each asset and its position in the global economy.

Advantages of investing in commodities

The sector offers significant advantages for long-term investors. Below is a list of benefits that make investments in commodities part of a strategic portfolio:

inflation hedging;
high correlation with the real economy;
availability of liquid instruments (futures, ETFs, mining company stocks);
earning potential with demand growth;
independence from the banking sector;
resilience to currency fluctuations;
low correlation with stock assets;
predictable seasonality in agricultural products;
investment opportunities through options and index solutions;
access to a global market with high liquidity.

An investor who understands cycles can benefit from short-term fluctuations or build a stable long-term asset in the portfolio.

How to invest in commodities: tools and approaches

There are several ways to enter this market. The most direct approach is trading futures, where a contract is bought or sold with a fixed execution date. An alternative is options, which grant the right but not the obligation to enter a transaction. Beginners often use ETFs reflecting the dynamics of the underlying asset or purchase shares of mining companies sensitive to commodity price changes.

The choice depends on the level of knowledge, acceptable risk tolerance, desired investment horizon, and available capital. Investments in commodities are not recommended without an understanding of market mechanisms and basic trading principles.

Investment strategies in the sector

A successful model is always built on fundamental and technical principles. Investment strategies can vary in horizon, activity level, and management approach. Popular approaches include:

speculative day trading on volatility;
holding futures contracts for positions;
purchasing ETFs on precious metals as part of a defensive portfolio;
investing in oil and gas or metallurgical company stocks;
using options for loss control;
diversifying between commodity categories;
trading seasonal patterns in the agricultural sector;
combining futures and spot investments;
long-term holding of gold as a hedging asset;
applying technical analysis on daily charts.

The choice of strategy depends on goals – capital growth, inflation protection, or speculative income. All investments in commodities require testing and calculation of acceptable loss levels.

Risks when dealing with assets

Despite the high profit potential, investments in this sector come with a significant level of uncertainty. Before opening a position, it is important to be aware of all possible risks. Investors need to consider the impact of political decisions on sharp price fluctuations, as well as potential market manipulation by major participants.

Additional threats include imbalances between supply and demand, high cost of holding futures contracts, and currency fluctuations, especially in international transactions.

Understanding threats and managing them through diversification, prudent risk management, and continuous monitoring are particularly important when it comes to investments in commodities.

Earning on commodities: is stable income possible?

The stability of income depends on the tactics used by the investor. Working with gold or oil in the long term provides moderate income with low correlation to indices. Aggressive trading of gas or metals futures allows for quick results but requires skills.

A professional approach to risk management, understanding market mechanisms, and clear goals enable earning to be systematic rather than random. However, stability is only possible with a clear structure and a well-thought-out investment strategy.

Investments in commodities as part of a portfolio

In modern conditions, investments in physical assets serve as insurance against instability. Investments in commodities complement traditional asset classes: stocks, bonds, real estate. Due to low correlation with other segments, such assets increase portfolio stability.

The commodity component can range from 10 to 30% depending on goals and risk tolerance. Regular review of the structure, analysis of cycles, and dynamic balancing make such investments part of systematic financial planning.

Conclusion

The answer to whether to form investments in commodities is unequivocal: with knowledge, discipline, and strategy – yes. It is not a universal solution, but a powerful tool for capital protection, diversification, and inflation hedging. Success requires preparation, understanding of trading mechanisms, and the ability to adapt to conditions. This is where the potential of markets lies – in rational aggression and balanced logic!

August 23, 2025

How to Evaluate the Effectiveness of an Investment Portfolio: Best Evaluation Methods

Creating a portfolio is only half the battle. The real work begins afterwards. Evaluating the portfolio’s effectiveness is the key to control, analysis, and improvement of results, especially when the goals go beyond simple “buy and wait for growth.”

Why Portfolio Evaluation is Necessary

Without measurements, it is impossible to manage — this statement is relevant in investments as well. Financial assets can behave unstably over time: some grow, others decline, and some show zero dynamics. To preserve and increase capital, it is necessary to track not only profitability but also the level of risk, volatility, alignment with goals, and behavior relative to benchmarks.

Simple profit in percentages will not say anything if the losses incurred are not taken into account. Therefore, a professional approach requires the use of precise indicators and mathematical models.

Main Goals and Analysis Parameters

Before starting calculations, it is important to determine what exactly needs to be measured. Evaluation is carried out based on several criteria:

return level in relation to risk;
income stability and volatility;
deviation from the benchmark;
balance of asset classes;
compliance with personal risk profiling.

All aspects should be analyzed together. Otherwise, a portfolio may be mistakenly considered successful when it has long deviated from the strategy and goals.

Classic Methods of Evaluating Investment Portfolio Quality

The financial industry has accumulated an arsenal of methods that allow for evaluating portfolio effectiveness:

Sharpe Ratio — shows how much profit is generated per unit of risk measured by standard deviation;
Sortino Ratio — a refined version of Sharpe, considering only negative fluctuations;
Treynor Ratio — relies on market risk measured through the beta coefficient;
Jensen’s Alpha — demonstrates the excess return over the expected at a given level of market risk;
Benchmark — comparison with a benchmark index, such as S&P 500 or an industry indicator.

Formulas allow breaking down the results, removing emotions, and focusing on numbers.

How to Use Sharpe and Its Analogues

The most popular indicator — the Sharpe Ratio — is used to assess the relationship between profit and risk. The higher the value, the more efficiently the portfolio works at the given volatility. However, Sharpe has a weakness: it considers all deviations, including those related to growth.

Here, the Sortino Ratio comes in handy, excluding positive fluctuations and focusing only on potential downturns. This perspective is considered more logical because investors are concerned about the risk of decline, not growth.

For those analyzing results with a connection to market dynamics, Treynor and Jensen ratios are suitable.

Benchmarks: References for Comparison

Understanding how much a case deviates from a basic reference point helps track efficiency not in a vacuum but in the context of the current situation. Typical benchmarks include stock indices such as S&P 500, MSCI World, or industry indicators.

The choice of benchmark depends on the composition of assets. If the case consists mainly of American stocks, comparing with the S&P 500 would be logical. And if it involves global securities, it’s better to take an index reflecting international markets.

Risk Profiling and Its Role in Strategy Selection

Before evaluating portfolio effectiveness and calculating how well it met expectations, it is necessary to align its behavior with personal goals and an acceptable risk level. This is where risk profiling comes into play — determining the investment temperament: conservative, balanced, or aggressive.

The evaluation is based on surveys, preference analysis, and acceptable capital drawdown. A case compiled without considering these factors may be potentially profitable but psychologically unbearable for the owner.

How Diversification Works in Practice

Allocating assets across classes, regions, and industries reduces portfolio sensitivity to unexpected changes. Diversification specifically helps offset declines in some securities with growth in others.

A well-structured set of investments not only looks better but also weathers crises better. For example, a decrease in stocks can be balanced by the growth of bonds or defensive instruments. The effectiveness of distribution can be checked through the return-to-volatility ratio over a long period.

CAPM Model and Markowitz Theory: Fundamental Approaches

Among the classical portfolio study methods, the Capital Asset Pricing Model (CAPM) stands out. It establishes the relationship between expected return and market risk, helping understand if the result aligns with the commitments taken.

Complementing this is the Markowitz Theory, which underpins modern portfolio theory. It states that for a given return, there is a set of assets with minimal risk. Conversely, to achieve higher returns, an investor must accept higher volatility. The task is to find the perfect balance.

Black-Litterman Theory: Modern View on Evaluation

Many consider the Black-Litterman theory a modern reinterpretation of Markowitz. It integrates investor’s subjective forecasts with market objective data, making the model more flexible and applicable to real conditions where participants’ views may vary significantly.

This approach is useful for cases with alternative assets where standard methods may not work.

Which Tools to Choose in 2025?

Evaluating portfolio effectiveness in 2025 requires a comprehensive approach. Simply looking at the final profit percentage is not enough. It is important to consider diversification, benchmark behavior, risk indicators, and stability.

The most accurate picture is provided by combinations: ratios + comparative analysis + behavioral parameters. This system allows for establishing a monitoring style resistant to emotions and sharp movements. After all, the main goal is not just to earn income but to retain it in the long term!

August 26, 2025