4 min

Investment Portfolio: What it is & How to Build One

Mar 15, 2023
in a nutshell
  • Your investment portfolio is a collection of all the assets you own. That includes investments across different asset classes, like stocks and bonds.
  • Diversification means spreading out the risk and investing in a wide variety of asset classes, sectors, and geographic locations.
  • You can include a mix of the following in your investment portfolio: stocks, bonds, real estate, cryptocurrency, and money market vehicles.
Image of An investment portfolio takes into account your income, age, time horizon, risk tolerance and goals. Find out how to build one that's right for you.
in a nutshell
  • Your investment portfolio is a collection of all the assets you own. That includes investments across different asset classes, like stocks and bonds.
  • Diversification means spreading out the risk and investing in a wide variety of asset classes, sectors, and geographic locations.
  • You can include a mix of the following in your investment portfolio: stocks, bonds, real estate, cryptocurrency, and money market vehicles.

Your investment portfolio is a collection of all the assets you own. That includes investments across different asset classes, like stocks and bonds. Your investment portfolio factors into your net worth. The total value of your assets minus the total value of your liabilities (debts) brings you to that magic number. Typically, the goal is to have a positive net worth — and to use your investments to grow your wealth over time.

Let’s unpack what’s included in an investment portfolio, the purpose of diversification, and how it's possible to build an investment portfolio that’s in line with your financial goals.

What is an investment portfolio?

No two portfolios are the same. One investor may take a more aggressive approach and hold higher-risk assets, while another might prefer a more conservative asset mix. Your risk tolerance, investment goals, and time horizon will all shape your investment strategy.

If you’re younger and have more time to ride out periods of market volatility, you might have no problem assuming more risk in your portfolio. But a 65-year-old who’s approaching retirement probably won’t have the same outlook. Safer, low-risk investments will likely make up a larger chunk of their portfolio. That’s not to say folks in this camp shouldn’t be investing in stocks and other high-risk assets. That might actually help them keep pace with inflation when they’re no longer working, but it’s a balancing act.

What’s included in an investment portfolio?

An investment portfolio can include all types of assets. Its overall value will depend on a variety of factors like current market conditions and how well your investments perform. Having said that, an investment portfolio may consist of:


Stocks represent ownership shares in publicly traded companies. Investors can buy and sell them through exchanges like the New York Stock Exchange and the Nasdaq. If you sell shares for more than you paid for them — and your earnings outweigh your tax liability — you’ll net a profit. Losses are also possible. Historically speaking,  the average annual return of the stock market has been around 10%.

Individual stocks are often considered volatile investments, but exchange-traded funds (ETFs), index funds and mutual funds are generally seen as safer ways to invest in stocks. They allow you to buy baskets of different assets and also provide some built-in diversification.


Bonds are a type of debt security. They’re available through government entities, states and municipalities, and individual companies. When you purchase a bond, the issuer is responsible for paying you back with interest. Return on investment (ROI) is usually not as strong as the stock market, but bonds can add some much-needed stability to an investment portfolio. For example, the guaranteed return on series I bonds issued November 1, 2022 to April 30, 2023 is 6.89%. These types of government bonds are indexed for inflation every six months. 

Real estate

Real estate investing might mean buying and renting out properties. This usually involves a good amount of upfront capital — a 20% to 30% down payment is the norm for this kind of mortgage. There’s also the cost and time required to maintain the property. Some investors prefer buying and flipping properties. Again, you’ll probably need a pool of cash to fund the purchase and repairs.

Investing in real estate investment trusts (REITs) offers an alternative path. These allow you to invest in companies that own, operate or fund income-producing real estate. It’s a more hands-off approach, plus REITs are required to return at least 90% of taxable income to shareholders each year. The value of REITs can be especially sensitive to rises and falls in the stock and real estate markets, like changes in interest rates. 


This asset class has made a lot of headlines in recent years, especially when Bitcoin’s value skyrocketed to $65,496 in 2021. But cryptocurrency is considered a very volatile investment, dipping to lows of $16,195 in 2022. It’s possible to sprinkle some cryptocurrency into your investment portfolio without such a high level of risk.  

With a Bitcoin ETF, for example, you aren’t investing in individual Bitcoin. Instead, you’re buying into a fund that tracks its value and trades through a traditional market exchange. This method can carry additional fees. 

Money market vehicles or cash equivalents

Returns are usually more modest when compared to higher-risk assets, but these investments can help round out a portfolio. A certificate of deposit (CD) is one example. When you put money into this type of account, you’ll earn interest if you leave your money alone for a predetermined amount of time. If you pull money out during this maturity period, you’ll likely be hit with a penalty. Longer terms usually translate to higher interest rates.

A money market account, on the other hand, is like a checking account mixed with a savings account. Your money will earn interest, and most money market accounts come with a checkbook or debit card for easy access within withdrawal restrictions. Interest rates are usually higher when compared to a traditional savings account, but they may have large minimum deposit requirements and lower yields than other bank products.

3 types of investment accounts

Assets can be held across a variety of accounts. When taken together, this forms your investment portfolio. Here’s a rundown of three common investment vehicles: 

Retirement accounts

401(k)s and individual retirement accounts (IRAs) are included in this bucket. These accounts can help you save for retirement and come with a variety of tax benefits. 

Brokerage accounts

A brokerage account doesn’t have the tax advantages that retirement accounts offer, but there are no contribution limits or early withdrawal penalties.

A robo-advisor

This is a tech-powered financial advisor that automates investing. The investor usually answers some general questions to personalize their recommendation. Then, the platform uses algorithms to select investments on their behalf. Acorns Invest is an option that follows this approach. The robo-advisor automatically rounds up transactions from linked debit or credit cards, then invests the spare change.

Benefits of a diversified portfolio

Many experts believe maintaining a diversified portfolio can help reduce some market risk, while smoothing out returns and potentially improving long-term portfolio performance. Let’s say you put all your investing dollars into one particular asset class, like individual stocks. If those stocks don’t perform as expected, that could take down your whole portfolio. The same goes for overinvesting in a particular sector or industry.

Diversification just means spreading out the risk and investing in a wide variety of asset classes, sectors, and geographic locations. You can diversify even further within each asset class. With stocks, for example, you might invest in a mix of individual stocks, ETFs and mutual funds. The idea is to avoid putting all your eggs in one basket.

How to build an investment portfolio: 4 steps

Whether you’re just starting to invest or have been at it for a while, it’s never too late to revisit your investment portfolio. Below is a cheat sheet for building a portfolio that feels right for you.

Step 1: Identify your financial goals

When setting a financial goal, think about why you’re investing in the first place. You may have a mix of short- and long-term objectives like:

Your timeline and savings target for each financial goal can inform your investment strategy. To ensure your portfolio works towards your personal values, you can also leverage ESG investing to invest in companies that are socially responsible. 

Step 2: Assess your risk tolerance

Investing is inherently risky, but playing it safe has its own risks. If you hold the bulk of your wealth in cash, you could limit your potential benefit from compound interest and investment gains. (Try our compound interest calculator to see for yourself!) It all begins with determining what level of risk you're comfortable with. 

For example, younger investors may feel confident leaning into higher-risk investments because they’re further out from retirement — and have more time to come back from market downturns. Those who are approaching retirement or already retired will probably want a more conservative investment portfolio. A financial advisor can help you assess your risk appetite and settle on investments that feel good to you.

Step 3: Determine your asset allocation 

Your asset allocation is simply the way your assets are distributed across your investment portfolio. The rule of 100 is common among financial advisors. Subtract your age from 100 — the result is the percentage of your portfolio that should be devoted to stocks. If you’re 30 years old, that means you’d hold 70% stocks. If you stick with this strategy, your investment portfolio should gradually become more conservative as you age.

Step 4: Portfolio rebalancing

Portfolio rebalancing is a necessary part of maintaining your investment portfolio. Even if you pick the ideal asset allocation, you can expect the value of those assets to fluctuate over time. That might be due to regular market activity, economic turbulence, geopolitical tension or other factors. Your asset allocation could shift and change as a result. Rebalancing recalibrates your investment portfolio and puts it back to your desired allocation. This involves buying and selling portions of your portfolio.

Most financial experts recommend rebalancing your portfolio every six to 12 months, but getting it right can be complicated. That’s why Acorns does it automatically. (Yes, please.) When it comes to your investment portfolio, consider it one less thing to worry about.

This material has been presented for informational and educational purposes only. The views expressed in the articles above are generalized and may not be appropriate for all investors. The information contained in this article should not be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product. There is no guarantee that past performance will recur or result in a positive outcome. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions. No level of diversification or asset allocation can ensure profits or guarantee against losses. Article contributors are not affiliated with Acorns Advisers, LLC. and do not provide investment advice to Acorns’ clients. Acorns is not engaged in rendering tax, legal or accounting advice. Please consult a qualified professional for this type of service.

Marianne Hayes

Marianne Hayes is a content strategist and longtime freelance writer who specializes in personal finance topics. 

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