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Investment Portfolio: What It Is and How to Build a Good One
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Investment Portfolio: What It Is and How to Build a Good One
Investment portfolios don't have to be complicated. You can use funds or even a robo-advisor to build a simple and effective portfolio.
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6 years of experience Expertise Investing for beginners financial advice long-term investingAlana Benson is an editor who joined NerdWallet in 2019. Historically she has covered a wide variety of investing topics including stocks, socially responsible investing, cryptocurrency, mutual funds, HSAs and financial advice. She is also a frequent contributor to NerdWallet's "Smart Money" podcast. Alana has appeared on FOX Houston and the "PennyWise" podcast and has been quoted in MarketWatch and The Sun. Before joining NerdWallet, she wrote two books on identity theft and several young adult nonfiction titles. Her work has been featured in The New York Times, The Washington Post, The Associated Press, MSN, Yahoo Finance and MarketWatch.
Alana Benson is an editor who joined NerdWallet in 2019. Historically she has covered a wide variety of investing topics including stocks, socially responsible investing, cryptocurrency, mutual funds, HSAs and financial advice. She is also a frequent contributor to NerdWallet's "Smart Money" podcast. Alana has appeared on FOX Houston and the "PennyWise" podcast and has been quoted in MarketWatch and The Sun. Before joining NerdWallet, she wrote two books on identity theft and several young adult nonfiction titles. Her work has been featured in The New York Times, The Washington Post, The Associated Press, MSN, Yahoo Finance and MarketWatch. Published in Editor & Content Strategist + more + more
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19 years of experience Expertise Retirement planning investment management investment accountsArielle O’Shea leads the investing and taxes team at NerdWallet. She has covered personal finance and investing for nearly 20 years, and was a senior writer and spokesperson at NerdWallet before becoming an editor. Previously, she was a researcher and reporter for leading personal finance journalist and author Jean Chatzky, a role that included developing financial education programs, interviewing subject matter experts and helping to produce television and radio segments. Arielle has appeared on the "Today" show, NBC News and ABC's "World News Tonight," and has been quoted in national publications including The New York Times, MarketWatch and Bloomberg News. She is based in Charlottesville, Virginia.
Arielle O’Shea leads the investing and taxes team at NerdWallet. She has covered personal finance and investing for nearly 20 years, and was a senior writer and spokesperson at NerdWallet before becoming an editor. Previously, she was a researcher and reporter for leading personal finance journalist and author Jean Chatzky, a role that included developing financial education programs, interviewing subject matter experts and helping to produce television and radio segments. Arielle has appeared on the "Today" show, NBC News and ABC's "World News Tonight," and has been quoted in national publications including The New York Times, MarketWatch and Bloomberg News. She is based in Charlottesville, Virginia. Published in Head of Content, Investing & Taxes + more + more
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10 years of experience Expertise Stock market Investment management Exchange-traded fundsAnna-Louise is a former investing and retirement writer for NerdWallet. She has been reporting on stocks and the economy for more than a decade. Her writing has appeared in Bloomberg, Fast Company, Crain's Chicago Business and USA Today.
Anna-Louise is a former investing and retirement writer for NerdWallet. She has been reporting on stocks and the economy for more than a decade. Her writing has appeared in Bloomberg, Fast Company, Crain's Chicago Business and USA Today. Writer + more + moreLike any industry, investing has its own language. And one term people often use is "investment portfolio," which refers to all of your invested assets.
Like any industry, investing has its own language. And one term people often use is "investment portfolio," which refers to all of your invested assets.Building an investment portfolio might seem intimidating, but there are steps you can take to make the process painless. No matter how engaged you want to be with your investment portfolio, there’s an option for you.
Building an investment portfolio might seem intimidating, but there are steps you can take to make the process painless. No matter how engaged you want to be with your investment portfolio, there’s an option for you.What is an investment portfolio?
What is an investment portfolio?An investment portfolio is a collection of assets and can include investments like stocks, bonds and mutual funds. It's more of a concept than a physical space, especially in the age of digital investing, but it can be helpful to think of all your assets under one metaphorical roof.
An investment portfolio is a collection of assets and can include investments like stocks, bonds and mutual funds. It's more of a concept than a physical space, especially in the age of digital investing, but it can be helpful to think of all your assets under one metaphorical roof.For example, if you have a 401(k), an individual retirement account and a taxable brokerage account, you should look at those accounts collectively when deciding how to invest them.
For example, if you have a 401(k), an individual retirement account and a taxable brokerage account, you should look at those accounts collectively when deciding how to invest them.How to build an investment portfolio
How to build an investment portfolio1. Decide if you want to do it yourself or get some help
1. Decide if you want to do it yourself or get some helpIf building an investment portfolio from scratch sounds like a chore, you don't have to do it yourself. Robo-advisors are an inexpensive alternative that factor in your risk tolerance and overall goals to build and manage an investment portfolio for you. (See our picks for the best robo-advisors.)
If building an investment portfolio from scratch sounds like a chore, you don't have to do it yourself. Robo-advisors are an inexpensive alternative that factor in your risk tolerance and overall goals to build and manage an investment portfolio for you. ( See our picks for the best robo-advisors .)If you do want to build a portfolio yourself, online brokers are increasingly offering products that make it extremely easy. Previously, building a portfolio of different assets meant managing all those investments individually, too.
If you do want to build a portfolio yourself, online brokers are increasingly offering products that make it extremely easy. Previously, building a portfolio of different assets meant managing all those investments individually, too. Brokers with strong portfolio-building toolsOf the brokers NerdWallet reviews, here are the ones that offer tools that make it simple to build your own portfolio.
Of the brokers NerdWallet reviews, here are the ones that offer tools that make it simple to build your own portfolio.Broker
Broker BrokerMax number of assets
Max number of assets Max number of assetsPrice
Price Price M1 Pies100, though users can request access to 150.
100, though users can request access to 150.$3 per month on balances under $10K
$3 per month on balances under $10K Fidelity Baskets50
50$4.99 per month
$4.99 per month Public Investment Plans20
20$0.49 - $1.99 per recurring investment
$0.49 - $1.99 per recurring investment Webull Wefolio10
10Free
FreeCharles Schwab Investing Themes
Charles Schwab Investing Themes25, though you can't build one from scratch.
25, though you can't build one from scratch.Free
Free🤓 Nerd Tip: These are all examples of brokerage accounts, which you'll need in order to start investing. You can see our full list of the best brokerage accounts here.
🤓 Nerd Tip: Nerd Tip: These are all examples of brokerage accounts, which you'll need in order to start investing. You can see our full list of the best brokerage accounts here . Using a financial advisorIf you want more than just investment management, an online financial planning service or a financial advisor can help you build your portfolio and map out a comprehensive financial plan.
If you want more than just investment management, an online financial planning service or a financial advisor can help you build your portfolio and map out a comprehensive financial plan.» See our list of the best financial advisors
» » See our list of the best financial advisors2. Choose an account that works toward your goals
2. Choose an account that works toward your goalsTo build an investment portfolio, you’ll need an investment account.
To build an investment portfolio, you’ll need an investment account.There are several different types of investment accounts. Some, like IRAs, are meant for retirement and offer tax advantages for the money you invest. Regular taxable brokerage accounts are better for non-retirement goals, like a down payment on a house. Consider what exactly it is you're investing for before you choose an account.
There are several different types of investment accounts. Some, like IRAs, are meant for retirement and offer tax advantages for the money you invest. Regular taxable brokerage accounts are better for non-retirement goals, like a down payment on a house. Consider what exactly it is you're investing for before you choose an account.» Learn more about the five main types of investment accounts
» » Learn more about the five main types of investment accounts3. Pick investments based on your risk tolerance
3. Pick investments based on your risk toleranceOne of the most important things to consider when creating a portfolio is your personal risk tolerance. Your risk tolerance is your ability to accept investment losses in exchange for the possibility of earning higher investment returns.
One of the most important things to consider when creating a portfolio is your personal risk tolerance. Your risk tolerance is your ability to accept investment losses in exchange for the possibility of earning higher investment returns.Your risk tolerance is tied not only to how much time you have before your financial goal, such as retirement, but also to how you mentally handle watching the market rise and fall. If your goal is many years away, you have more time to ride out those highs and lows, which will let you take advantage of the market’s general upward progression.
Your risk tolerance is tied not only to how much time you have before your financial goal, such as retirement, but also to how you mentally handle watching the market rise and fall. If your goal is many years away, you have more time to ride out those highs and lows, which will let you take advantage of the market’s general upward progression.After opening an investment account, you’ll need to fill your portfolio with the actual assets you want to invest in. Here are some common types of investments and their associated risks.
After opening an investment account, you’ll need to fill your portfolio with the actual assets you want to invest in. Here are some common types of investments and their associated risks. StocksStocks are a tiny slice of ownership in a company. Investors buy stocks that they believe will go up in value over time. The risk, of course, is that the stock might not go up at all, or it might even lose value. To help mitigate that risk, many investors invest in stocks through mutual funds that hold a collection of stocks from a wide variety of companies. If you do opt for individual stocks, it’s usually wise to allocate only 5% to 10% of your portfolio to them.
Stocks are a tiny slice of ownership in a company. Investors buy stocks that they believe will go up in value over time. The risk, of course, is that the stock might not go up at all, or it might even lose value. To help mitigate that risk, many investors invest in stocks through mutual funds that hold a collection of stocks from a wide variety of companies. If you do opt for individual stocks, it’s usually wise to allocate only 5% to 10% of your portfolio to them.» How to invest in stocks as a beginner
» » How to invest in stocks as a beginner BondsBonds are loans to companies or governments that get paid back over time with interest. Bonds are considered to be safer investments than stocks, but they generally have lower returns. Since you know how much you’ll receive in interest when you invest in bonds, they’re referred to as fixed-income investments. This fixed rate of return for bonds can balance out the riskier investments, such as stocks, within an investor’s portfolio.
Bonds are loans to companies or governments that get paid back over time with interest. Bonds are considered to be safer investments than stocks, but they generally have lower returns. Since you know how much you’ll receive in interest when you invest in bonds, they’re referred to as fixed-income investments. This fixed rate of return for bonds can balance out the riskier investments, such as stocks, within an investor’s portfolio. » » Learn how to buy bonds Mutual fundsThere are a few different kinds of mutual funds you can invest in, but their general advantage over buying individual stocks is that they allow you to add instant diversification to your portfolio. Mutual funds allow you to invest in a basket of securities, made up of investments such as stocks or bonds, all at once. Mutual funds do have some degree of risk, but they are generally less risky than individual stocks. Some mutual funds are actively managed, but those tend to have higher fees, and they often underperform passively managed funds, which are commonly known as index funds.
There are a few different kinds of mutual funds you can invest in, but their general advantage over buying individual stocks is that they allow you to add instant diversification to your portfolio. Mutual funds allow you to invest in a basket of securities, made up of investments such as stocks or bonds, all at once. Mutual funds do have some degree of risk, but they are generally less risky than individual stocks. Some mutual funds are actively managed, but those tend to have higher fees, and they often underperform passively managed funds, which are commonly known as index funds.Index funds and exchange-traded funds (ETFs) try to match the performance of a certain market index, such as the S&P 500. Because they don't require a fund manager to actively choose the fund's investments, these vehicles tend to have lower fees than actively managed funds. The main difference between ETFs and index funds is that ETFs can be actively traded on an exchange throughout the trading day, like individual stocks, while index funds can only be bought and sold for the price set at the end of the trading day.
Index funds and exchange-traded funds (ETFs) try to match the performance of a certain market index, such as the S&P 500. Because they don't require a fund manager to actively choose the fund's investments, these vehicles tend to have lower fees than actively managed funds. The main difference between ETFs and index funds is that ETFs can be actively traded on an exchange throughout the trading day, like individual stocks, while index funds can only be bought and sold for the price set at the end of the trading day.» Learn more about index funds or ETFs, plus how to invest in them.
» » Learn more about index funds or ETFs , plus how to invest in them.4. Determine the best asset allocation for you
4. Determine the best asset allocation for youSo you know you want to invest in mostly funds, some bonds and a few individual stocks, but how do you decide exactly how much of each asset class you need? The way you split up your portfolio among different types of assets is called your asset allocation, and it’s highly dependent on your risk tolerance.
So you know you want to invest in mostly funds, some bonds and a few individual stocks, but how do you decide exactly how much of each asset class you need? The way you split up your portfolio among different types of assets is called your asset allocation, and it’s highly dependent on your risk tolerance.You may have heard recommendations about how much money to allocate to stocks versus bonds. Commonly cited rules of thumb suggest subtracting your age from 100 or 110 to determine what portion of your portfolio should be dedicated to stock investments. For example, if you’re 30, these rules suggest 70% to 80% of your portfolio be allocated to stocks, leaving 20% to 30% of your portfolio for bond investments. In your 60s, that mix shifts to 50% to 60% allocated to stocks and 40% to 50% allocated to bonds.
You may have heard recommendations about how much money to allocate to stocks versus bonds. Commonly cited rules of thumb suggest subtracting your age from 100 or 110 to determine what portion of your portfolio should be dedicated to stock investments. For example, if you’re 30, these rules suggest 70% to 80% of your portfolio be allocated to stocks, leaving 20% to 30% of your portfolio for bond investments. In your 60s, that mix shifts to 50% to 60% allocated to stocks and 40% to 50% allocated to bonds.When you’re creating a portfolio from scratch, it can be helpful to look at model portfolios to give you a framework for how you might want to allocate your own assets. Take a look at the examples below to get a sense of how aggressive, moderate and conservative portfolios can be constructed.
When you’re creating a portfolio from scratch, it can be helpful to look at model portfolios to give you a framework for how you might want to allocate your own assets. Take a look at the examples below to get a sense of how aggressive, moderate and conservative portfolios can be constructed.
» How to choose investments for your IRA
» » How to choose investments for your IRA5. Rebalance your investment portfolio as needed
5. Rebalance your investment portfolio as neededOver time, your chosen asset allocation may get out of whack. Rebalancing is how you restore your investment portfolio to its original makeup. (If you’re using a robo-advisor, you probably won’t need to worry about this, since it will likely automatically rebalance your portfolio as needed.) Some investments can even rebalance themselves, such as target-date funds, a type of mutual fund that automatically rebalances over time.
Over time, your chosen asset allocation may get out of whack. Rebalancing is how you restore your investment portfolio to its original makeup. (If you’re using a robo-advisor, you probably won’t need to worry about this, since it will likely automatically rebalance your portfolio as needed.) Some investments can even rebalance themselves, such as target-date funds , a type of mutual fund that automatically rebalances over time.Some advisors recommend rebalancing at set intervals, such as every six or 12 months, or when the allocation of one of your asset classes (such as stocks) shifts by more than a predetermined percentage, such as 5%. For example, if you had an investment portfolio with 60% stocks and it increased to 65%, you may want to sell some of your stocks or invest in other asset classes until your stock allocation is back at 60%.
Some advisors recommend rebalancing at set intervals, such as every six or 12 months, or when the allocation of one of your asset classes (such as stocks) shifts by more than a predetermined percentage, such as 5%. For example, if you had an investment portfolio with 60% stocks and it increased to 65%, you may want to sell some of your stocks or invest in other asset classes until your stock allocation is back at 60%. About the authors Alana Benson Alana Benson Alana Benson is an investing writer who covers socially responsible and ESG investing, financial advice and beginner investing topics. Her work has appeared in The New York Times, The Washington Post, MSN, Yahoo Finance, MarketWatch and others. See full bio. Anna-Louise Jackson Anna-Louise Jackson Anna-Louise Jackson is a former investing and retirement writer for NerdWallet. Her work has been featured by Bloomberg, CNBC, The Associated Press and more. See full bio.Helpful resources
Helpful resources How to Start Investing in Stocks Individual Retirement Account (IRA): What It Is & How It Works The Best Index Funds and How to Start Investing More like this Investment Basics Investing Best Robo-Advisors: Top Picks for 2026 We spent hours testing robo-advisors to find ones that charge low fees but still offer high-quality features, including automated portfolio rebalancing, exposure to a range of asset classes and financial planning tools. 2 By Alana Benson, Sabrina Parys Investing in Dividend Stocks: Guide, Calculator and Top 7 Yields for June 2026 Dividend stocks can be a great choice for investors looking for passive income and portfolio stability. Here's what to look for when evaluating dividend stocks and how to invest in them. 2 By Chris Davis, Sam Taube Best Brokers for Beginner Investors: Top Picks for 2026 We spent hours analyzing the best brokers for beginners to find ones that offer low costs, helpful educational content and a broad investment selection. Our testers also looked for trading platforms that are easy to navigate. 2 By Alana Benson, Bella Avila Best Investments: Where to Invest in 2026 Wondering where to invest your money this year? High-yield savings accounts, CDs, bonds, funds and stocks are all considered among the best investments available. Learn more about the risks, potential returns and how to get started. 2 By Chris Davis, Alieza Durana Best Brokerage Accounts for Online Investing and Stock Trading in 2026 Based on hours of analysis and hands-on testing, here are our picks for the best brokerage accounts based on their low fees, strong platforms, quality customer support and other factors. Chris Davis Best Robo-Advisors: Top Picks for 2026 We spent hours testing robo-advisors to find ones that charge low fees but still offer high-quality features, including automated portfolio rebalancing, exposure to a range of asset classes and financial planning tools. 2 By Alana Benson, Sabrina Parys Investing in Dividend Stocks: Guide, Calculator and Top 7 Yields for June 2026 Dividend stocks can be a great choice for investors looking for passive income and portfolio stability. Here's what to look for when evaluating dividend stocks and how to invest in them. 2 By Chris Davis, Sam Taube Best Brokers for Beginner Investors: Top Picks for 2026 We spent hours analyzing the best brokers for beginners to find ones that offer low costs, helpful educational content and a broad investment selection. Our testers also looked for trading platforms that are easy to navigate. 2 By Alana Benson, Bella Avila Best Investments: Where to Invest in 2026 Wondering where to invest your money this year? High-yield savings accounts, CDs, bonds, funds and stocks are all considered among the best investments available. Learn more about the risks, potential returns and how to get started. 2 By Chris Davis, Alieza Durana Best Brokerage Accounts for Online Investing and Stock Trading in 2026 Based on hours of analysis and hands-on testing, here are our picks for the best brokerage accounts based on their low fees, strong platforms, quality customer support and other factors. Chris Davis Best Robo-Advisors: Top Picks for 2026 We spent hours testing robo-advisors to find ones that charge low fees but still offer high-quality features, including automated portfolio rebalancing, exposure to a range of asset classes and financial planning tools. 2 By Alana Benson, Sabrina Parys Investing in Dividend Stocks: Guide, Calculator and Top 7 Yields for June 2026 Dividend stocks can be a great choice for investors looking for passive income and portfolio stability. Here's what to look for when evaluating dividend stocks and how to invest in them. 2 By Chris Davis, Sam Taube Best Brokers for Beginner Investors: Top Picks for 2026 We spent hours analyzing the best brokers for beginners to find ones that offer low costs, helpful educational content and a broad investment selection. Our testers also looked for trading platforms that are easy to navigate. 2 By Alana Benson, Bella Avila Best Investments: Where to Invest in 2026 Wondering where to invest your money this year? High-yield savings accounts, CDs, bonds, funds and stocks are all considered among the best investments available. Learn more about the risks, potential returns and how to get started. 2 By Chris Davis, Alieza Durana