How to Build a Winning Share Trading Portfolio From Scratch

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Once a year or once every two years is fine for a portfolio review; and don’t overdo rebalancing, since you risk overreacting to short-term market movements.

Define Your Goals

Early target-setting of your trade is crucial. This will allow you to cultivate a decent trade strategy and carve out a handsome share portfolio. Trade targets have to be specific, measurable and realistic, and have to align with broader financial targets such that you are working toward something, not a wild goose chase. Remember trading doesn’t happen overnight and a winning trade or a losing trade mean jack as a trader. You need to be consistent and persistent as a trader and set the achievable trading goals and review them on a periodic basis and this way you can keep track of a strategy and make improvement time to time.

Determine Your Risk Tolerance

There is an element of risk in every investment, whether that risk consists of a potential loss, or a potential gain Being a successful investor starts with understanding your risk tolerance, and locking it in quickly. A good financial adviser can help you figure out your risk tolerance, as well as build a portfolio aligned with your goals, then give you further advice as your needs change. Your risk capacity is determined by objective financial factors such as income, expenses, assets and available risk capital, the amount of money you earmark to cover losses on your investments. You should distinguish between goals with a short time horizon and those with a long time horizon. For example, you might be comfortable or even impelled to take greater risk with investments whose proceeds fund this summer’s vacation or next winter’s mortgage payment than with investments that fund your future retirement in 20-30 years through your IRA or 401k.

Determine Your Time Frame

When buying shares you will take a different time-frame for deciding your investment depending on whether you are looking to make a quick profit in the short time scale or whether you want to adopt a longer term strategy when devising a portfolio. With an effective time-frame and strategy in your mind your portfolio will become more robust over time.

The most important thing to remember when trading multiple time frames is that each has a trend, and the trends are all interdependent – if the Daily trends are up while the Weekly and Monthly trends are down, you can still expect Daily trends to reverse and go back up.

Learning to interpret this relationship is critical in any use of technical analysis in putting together a portfolio. Of course, every form of trading style needs an approach and strategy distinctly different from the others.

Determine Your Investment Strategy

Having done so, the next step is choosing an investment strategy. This decision should always be aligned with your goals and risk tolerance, but also with timeline – if your time horizon and financial goal are years away, you are much more able to see dips and take the wider view, as there will be plenty of time to ride it out. Your investment strategy is what determines whether you’re actively or passively involved, whether you’re willing to take a risk, how your portfolio is constructed, and more. Say you’re a long-term investor: your goal should be to diversify your investments to the point where, even if one investment performs negatively, it won’t cause a major downturn for your portfolio as a whole.

Create Your Portfolio

Now that you know your goals, it is a simple matter to build the right portfolio to achieve them, selecting the appropriate amount of risk and expected return. And finally, let’s say you complete the portfolio. At that point you should be prepared to do some maintenance: these investments need tending. For example, it’s important to rebalance your portfolio on a periodic basis, maybe twice per year – that way your investments stay in line with your goals. A sound portfolio comprises of a diversified portfolio of investments, but not just across markets and sectors but also across market capitalisations. Tax consequences should always be taken into consideration whenever any portfolio changes are made.