Slogging your way through an investment portfolio can be a tough task for even the most experienced of brokers.
But don't limit yourself to stocks or any single type of investment, experts say. First figure out why you are investing: retirement, college savings or maybe just a new, expensive toy.
Structuring a portfolio is far from any "one-size fits all" solution, but a few basic guidelines offered by local financial planners can help you reach your investment goals, even with the national economy in the emergency room.
Identify your own goals
Different people invest for different reasons, and those goals lead to unique portfolios, experts say.
"The most important question is, 'What do you want this money for?'" said Sharon Allen, president of Sterling Wealth Management.
Retirement is the big one, or your kids' college education. It might be to buy a vacation home or boat. But knowing for what you're saving is step one.
How much money do you need? How much time do you have? How much of your income are you willing to invest, and how much income do you need your portfolio to generate?
These questions need to be answered before deciding where to put your money, and each investor will come out with a different portfolio based on a unique situation.
"The question then becomes what investment vehicles do you use to achieve that goal," said Aron McDonald, a certified financial planner with Busey Wealth Management.
Make sure you have a foundation in savings
Three to six months' worth of your salary in savings should suffice, McDonald said.
An emergency fund is important so you do not have to sell your investments in an unexpected situation.
Determine how much risk you can stomach
While subjective, a self-assessment is necessary to determine how much of your money you're actually willing to risk. Experience in the markets can play a role, too.
Investments run a spectrum of high risk/high return to low risk/low return, McDonald said. And deciding where to put yourself on the spectrum isn't always the easiest determination.
"Even if you have a long time horizon, but you get scared and sell your stock investments when the market goes way down, that's just self-defeating," McDonald said. "If you can't make it through and weather those difficult times in the market to achieve those longer average returns, then you don't belong in a higher growth-type portfolio."
Treasury bonds are the safest investment, McDonald said, but don't promise the higher average returns that stocks could produce in the long run. But stocks are more susceptible to short-term market conditions.
Developing a good mix between different types of investments – for example, stocks and bonds – is a must. But where the proportions lie depends entirely on the individual who is fronting the money.
Make sure diverse really is diverse
"Diversification is kind of like Investing 101," Allen said. "You need to know this, and it's very, very confusing to people."
Though your portfolio may appear diverse, it's important to have your money in different types of investments – not just different managers.
A nonunderstanding of diversification really hurt some people in the economic crumble of the past two years, Allen said.
"There were people that were invested in Merrill Lynch, Lehman Brothers, JP Morgan, Bank of America and Chase, and they thought, 'I'm really diversified,'" Allen said. "Or they were invested in GM, Chrysler and Ford and they thought, 'Great, I'm diversified.'"
But that's not really diverse. Make sure you have different kinds of investments from all across the market. And make sure everything is not in the U.S.
"You want to be invested globally," Allen said. "It's really, really important that you have a piece of U.S. stocks in there, and a piece of international stocks."
Maintain your portfolio
Take a look at your investments at least once a year, the experts say. Decide whether your goals have changed, and how to rebalance your investments accordingly.
Make sure your investments are keeping pace with inflation, which can really hurt if your portfolio is not weighted toward long-term growth.
"What happens sometimes is people don't take a look at their investment portfolios," Allen said.
"Then they found out that things are out of whack, and that area of the market gets hammered, and they just lost a whole bunch of money."
And keep an eye on the costs of your investments, too, especially if you're working with a broker, Allen said.
These costs could come in the form of opening an account, through the course of transactions or with fees when you sell an investment.