Lesson 48 Planning a share portfolio

How does the older investor differ in his approach to investment from the younger investor?

There is no shortage of tipsters around offering 'get-rich-quick' opportunities.But if you are a serious private investor, leave the Las Vegas mentaliy to those with money to fritter. The serious investor needs a  proper 'portfolio' -- a well planned selection of investments, with a definite structure and a clear aim. But exactly how does a newcomer to the stock market go about achieving that?

Well, if you go to five reputable stock brokers and ask them what you should do with your money, you're likely to get five different answers -- even if you give all the relevant information about your age, family finances and what you want from your investments. Moral? There is no one 'right' way to structure a portfolio. However, there are undoubtedly some wrong ways, and you can be sure that none of our five advisers would have suggested sinking all (or perhaps any) of your money into Periwigs.

So what should you do? We'll assume that you have sorted out the basics -- like mortgages, pensions, insurance and access to sufficient cash reserves. You should then estabilish your own individual aims. These are partly a matter of personal circumstances, partly amatter of psychology.

For instance, if you are older you have less time to recover from any major losses, and you may well wish to boost your pension income. So preserving your ccapital and generating extra income are your main priorities. In this case, you'd probably construct a portfolio with some shares (but not high risk ones), along with gilts, cash deposits, and perhaps convertibles or the income shares of split capital investment trusts.

If you are younger, and in a solid financial position, you may decide to take an aggressive approach -- but only if you're blessed with a sanguine disposition and won't sufufer slelepless nights over share prices. If you recgnize yourself in this description, you might include a couple of heady growth stocks in your portfolio, alongside your more pedestrian investiments. Onece you have decided on your investment aims, you can the decide where to put your money. The golden rule here is spread your risk -- if you put all of your money into Periwigs International, you're setting yourself up as a hostage to fortune.