Chasing your desired lifestyle is something that is attainable with the
right investment knowledge. Learn exactly how to build a financial portfolio.
Tips for Building a Complete Financial Portfolio
For most every one of us, there are hopes and
dreams that drive us. These include where we want to live, what attire we wear
and how we choose to invest our cash. For many folks, the true costs of
attaining that type of lifestyle are difficult to ascertain. Fortunately, there
are several methods that can be used to empower action by building a financial
portfolio. The question that needs to be asked is what comprises a good
financial portfolio? In short, the answer is a 6-month emergency supply of
cash, a well-stocked retirement account, zero debt and a broad range of
investments across the financial spectrum.
Planning is Paramount
Getting started is a breeze. It requires a handful
of resources in a pen and a piece of paper. First start off by listing all the
assets that you currently own such as liquid cash, CDs, retirement accounts,
cars, bonds, stocks and mutual funds. Next up, list all of your liabilities –
long-term loans, short-term loans, credit card debts and so on. All liabilities
should be listed since the best way to accurately create a complete financial
portfolio is with all relevant information. Your balance sheet will list total
assets and total liabilities, and compiling a financial portfolio can take a
significant amount of time.
Fire Up Your 401k
For the most part, companies will match all of your
contributions to your 401k account. The longer your tenure at the company, the
greater the matching contributions will be. 401k accounts can grow at a tax
deferred rate for many years (20, 30 or 40 years) and this can translate into
millions of dollars.
Pay Down Credit Card Debt
High interest credit card debt is a burden that can
kill an investment portfolio. Funds can be diverted from investment accounts
and mutual funds to the reduction of debt on your credit cards. The maximum
payments should be made on the cards with the highest interest rates, while
minimum balances should be paid on the other cards.
6-Month Emergency Cash Reserves
Homeowners are best served with a 6-month cash
reserve for emergency purposes. This allows for coverage of all exigencies such
as medical, home repairs, student loans, fixed payments, and unemployment
related issues.
Purchase Roth IRAs
For American investors, Roth IRAs are ideal for
individuals with an annual income of $150,000 (married couples) or $95,000
(singles). The benefit of funding a Roth IRA is that you can withdraw your
funds anytime you want at no cost. At age 59.5, the withdrawals are tax-free.
Further, you can use Roth IRAs to buy stocks and mutual funds. And you can use
your Roth IRA funds to enjoy zero-penalty medical insurance premiums if you
have been unemployed for 3 months or more.
Making a Down Payment on a Home
Making a down payment on a property is an effective
way to move away from an expense item to transforming something into equity.
All interest-related payments are tax deductible and there is a capital gains
tax exemption of $500k for married couples and $250k for single couples. Homes
can be purchased with a 20% down payment and a 3% - 4% annual gain.
Author’s Bio: Brett Chatz is a graduate of the University
of South Africa, and holds a Bachelor of Commerce degree, with Economics and
Strategic management as his major subjects. Nowadays Brett contributes from his
vast expertise for the globally renowned spread betting and CFD trading company
– Intertrader.
