How to Create an Investment Portfolio?

Setting up a bare bones investment portfolio takes 10 minutes at best. A lot of advisors will tell you that it takes hours of time, portfolio diversification, and a need to pour over financial statements until the end of time. Not true! In fact, that is one of the sales tactics used to lure you into paying their commissions.

The major brokerage firms have made investing so easy anyone who can operate a computer can setup a brokerage account. The idea behind these types of investment accounts has been to remove the intimidation factor of Wall Street to serve the segments of the public who do not know about, or want to learn about investing. However, they still want to make money!

The process has become so simplistic thanks to automation and creation of well diversified mutual funds that it has become no nonsense, fire and forget solution. Let me show you step by step how easy this really is:

1. Determine the age you want to retire. Just for simplicity we will say you will retire at 65, and you are currently 30. So, you have 35 years until your retirement.

2. Add 35 years to our current year of 2007 and you have 2042.

3. Go to one of your favorite brokeage houses like Vanguard (my personal favorite), Fidelity, or Charles Schwab to look for a Targeted Retirement Fund for the year 2040. Write down the name or symbol of the fund.
4. Click on any of the links that say "invest now" or "open an account now."

5. Complete the registration process with your personal information (name, address, etc.)
6. Fund your account by electronic transfer or by a paper check.

Congratulations... You are done! To make it even more convenient, just call them up and say "I would like to open an investment account." A knowledgable customer service representative will hold your hand through the entire process.

One other great asset to these automated investment plans, is that you can sign up to add funds into your account on a regular basis without any effort on your part. Just add your bank account information into your new portfolio, and it will automatically deduct a preset amount every 2 weeks, every month, etc.

Now, you may be wondering why we have chosen this particular 2040 Retirement Fund. This one fund is a collection of other mutual funds offered by the brokerage houses. What you are essentially buying is a well diversified collection of the US stock market and other foreign stock markets as well. As you grow older, the fund will begin to diversify into less risky investments such as income generating stocks, bonds, or cash.

If you are new to investing and do not plan to further educate yourself beyond this point, diversification through mutual funds is an absolute must. This will allow you to decrease potential risk from your investment portfolio by increasing the number of stocks you own. Its similar to the old adage "Don't put all your eggs in one basket," and can save you many sleepless nights when the markets start behaving badly.

If you want to build your own custom investment portfolio, its fairly easy but you should definetly do your homework first. Begin checking investment websites like MSN Money or Kiplingers for introductory information and a few good stock picks. If you prefer TV, tune into CNBC and try to absorb some of the commentary and advice from the professionals.

Personal Note: if anyone has investment questions or just needs a point in the right direction, leave a comment and I'll get back to you.