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The easy way to put together a portfolio of stocks and bonds

by , 24 June 2015

If you want to invest in stocks and bonds, you have two options.

You can sit for hours conducting in depth research into different companies and bonds of different maturities or you can invest in a handful of funds that do just that for you.

So how can you go about building a portfolio using funds?

Read on to find out…

Using ETFs makes investing simple

Exchange traded funds (ETFs) are baskets of shares that track particular indices. In other words, they’re tracker funds. ETFs reflect the make-up of the underlying index and mirrors its performance.

Various studies over the years have shown that paying extra for managed funds or expertise stock picking doesn’t always pay off. And sticking with the average market performance is not necessarily a bad thing.

Historically, stocks have been the best performing asset over the long-term, in spite of volatility.

ETFs can simplify the whole investment process. Instead of picking individual stocks and bonds, you can invest in ETFs instead. You gain exposure to a wide variety of stocks in different sectors and bonds, providing you with ample diversification.

How to build a portfolio using ETFs

If you want to build a portfolio using ETFs, you just have to decide what you want to include.

Chances are you’ll want exposure to some stocks.

You could invest in an ETF that tracks the largest companies on the Johannesburg Stock Exchange, then possibly include ETFs that track particular sectors, such as financials and industrials.

You can also buy into a government bond fund. This will help to lower the overall volatility from holding stocks in your portfolio.

If you want to add an international flavour, you could add in an ETF that invests in European stocks, Japanese stocks or another market.

By investing in a few carefully selected ETFs you can build a diversified, well-balanced portfolio.

Before committing, look into the most efficient way of buying into ETFs. You’ll have to pay a stock broker commissions and fees to invest or use a company like www.etfsa.co.za to facilitate your trades.

So there you have it. The easy way to put together a portfolio of stocks and bonds.

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The easy way to put together a portfolio of stocks and bonds
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