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.