How to Configure Your Investment Portfolio? A Beginner's Guide to Asset Allocation

When you ask “How should I invest,” 99% of the answers point in the same direction—building an investment portfolio. But what does that really mean? Why can’t you just pour all your money into a single stock or asset?

The Core Logic of Investment Portfolios

An investment portfolio is a strategy of holding multiple financial assets in certain proportions simultaneously. Stocks, funds, bonds, cryptocurrencies, bank deposits… combining different types of assets aims to pursue returns while keeping risks within manageable limits.

Imagine your plate—if you only serve one dish, your nutrition will be unbalanced. The same applies to investing—putting all your funds into one asset means that once you hit a “雷” (a big loss), you lose everything. Diversifying across different assets allows gains in other areas to offset losses in some.

This is the essence of an investment portfolio: using diversification to balance risk and opportunity.

Three Factors That Shape Your Investment Portfolio

1. Your attitude toward risk

Some get excited when the stock market rises 10%, while others worry about a 10% increase followed by a 30% drop. This reflects differences in risk preference.

Based on risk tolerance, investors generally fall into three categories:

• Risk-loving: Pursue high returns, can tolerate short-term volatility, usually young and with stable income
• Risk-neutral: Seek a balance between growth and stability
• Risk-averse: Prioritize capital preservation, prefer steady cash flow, often near retirement age

2. Your age and life stage

A 28-year-old working professional’s portfolio will differ from that of a 58-year-old retiree. Young people have about 30 years to accumulate wealth; even if they suffer a 30% loss once, they still have time to recover through future income. Conversely, a 65-year-old retiree no longer has a steady income, so their risk capacity drops significantly and should lean toward conservative allocations.

3. The characteristics of different assets and market environment

The same fund can have very different risks—money market funds versus index funds. Similarly, emerging market stock funds tend to be more volatile than those in developed markets—because emerging markets are more susceptible to geopolitical and economic policy shocks, and often have less diversified industrial structures.

Common Investment Portfolio Allocation Schemes

Based on the above three factors, several standard portfolio models have emerged in the market:

These ratios are not absolute but serve as reference standards. Investors with especially high risk tolerance can allocate an additional $100–$200 into higher-risk instruments like forex or cryptocurrencies.

If you prefer to build a portfolio within a single asset class (e.g., only funds), you can allocate like this:

How Beginners Can Start Building Their Own Investment Portfolio

The first step is crucial—know yourself. You need to understand your risk preference by taking tests or assessments. Only by knowing how much fluctuation you can tolerate can you determine how aggressive your asset allocation should be.

The second step is setting investment goals. Goals generally fall into three categories:

• Wealth growth: Set specific growth targets (e.g., double in 5 years), suitable for young and aggressive investors
• Wealth preservation: Aim to beat inflation, keep assets from depreciating, suitable for retirees
• Cash flow needs: Maintain liquidity for easy access, suitable for entrepreneurs or those needing flexible funds

The third step is selecting asset classes. Before deciding on allocations, you should have a basic understanding of stocks, funds, bonds, bank deposits, etc.—their risks, returns, and liquidity.

A Complete Example

Suppose Xiao A is a 28-year-old professional with NT$1,000,000, and is risk-loving.

Investment goal: Grow assets by 100% in 5 years, reaching NT$2,000,000

Asset allocation plan:

• Stocks: NT$500,000 (50%)
• Funds: NT$300,000 (30%)
• Bank fixed deposits: NT$100,000 (10%)
• Emergency fund: NT$100,000 (10%)

Why reserve 10% as an emergency fund? Because life always has unexpected needs. Investing all funds without liquidity could force you to sell at a loss when urgent cash is needed.

What to Watch Out for After Setting Your Portfolio

Building the portfolio is not the end—it’s the beginning. Market conditions change constantly, and your portfolio needs regular review and adjustment.

Common risks include:

• Systematic market risk: During bear markets, economic crises, or black swan events, the entire portfolio may decline
• Industry risk: Certain sectors may decline due to policy changes
• Psychological risk: Often the most deadly—panic selling during downturns, greed during rallies

Ways to manage these risks:

• Set stop-loss and take-profit points to avoid emotional decisions
• Maintain diversification across regions and sectors to reduce single risks
• Regularly evaluate and rebalance based on market changes
• Stay rational—don’t panic over short-term volatility, stick to your long-term plan

Common Questions for Beginners

Q: Can I build a portfolio with little capital?
A: Absolutely. Funds and bonds have low minimums—some funds in Taiwan start at NT$3,000. As your capital grows, gradually increase your investments; there’s no need to wait for a large sum to start.

Q: Will a well-allocated portfolio always make money?
A: Not necessarily. A portfolio is a risk-balancing tool; profitability depends on market performance and your specific asset choices. Continuous monitoring and optimization are needed.

Q: Can I copy someone else’s portfolio directly?
A: You can refer to others’ strategies, but it’s best to adjust according to your own goals and risk tolerance. Blindly copying without understanding can lead to losses you don’t know how to handle.

Q: Once I set my portfolio, can I just leave it alone?
A: No. Regular review is essential. Assets that performed well initially may underperform later due to market shifts, so adjustments are necessary. Periodic evaluation is a must.

In summary, the key to building an investment portfolio is finding the balance between risk and return. Know yourself, set clear goals, choose appropriate assets, and adjust regularly—these four steps form the foundation of sound investing. Of course, continuous learning and maintaining a calm mindset are equally important. Investing is not a get-rich-quick game but a long-term journey requiring patience and discipline.