Investing 101: A Beginner’s Guide to Building a Financial Portfolio

6 min readMay 6, 2023

Starting a journey into developing your financial portfolio is a marathon rather than a sprint which requires perseverance, commitment and patience; please be aware of scams promising you will become rich quickly.

To begin developing your financial portfolio, you will need to take three steps; the first step is to ensure you are secure in your finances; this means living within your financial means to have the capital/money to begin investing.

Step number two on the beginner’s guide to building your financial portfolio is to educate yourself on investing and what kind of investor you want to be and understand your risk tolerance.

This can involve investing in the housing market, the stock market or low-risk index funds like the S&P 500 index.

It’s also necessary to understand how you wish to invest, which is the part of your education making the option to go with a stockbroker responsible for building your financial portfolio or use platforms like Robin Hood to invest without a human stockbroker.

The final step in the beginner’s guide to building your financial portfolio will be your personal and professional development, including self-education, research, mental and physical health and other activities you may participate in for the rest of your life.

Becoming financially knowledgeable requires the development of several skill sets and beginning the process of education and understanding international markets and understand nature of investing which this article will take you through step by step.

Personal Financial Planning

If you start investing your money, it requires making life choices with potentially short-term negative consequences and can even impact your social circle or personal relationship.

If you have a beer fund, regularly spend £20 or more on junk food and other takeaways and spend hundreds of pounds on the weekends, this behaviour must change.

The art of investing for beginners is being financially frugal with how you spend your money; this requires discipline, which in turn may have consequences on your social circle because, in the case of the UK, socialising is heavily influenced by the UK’s drinking culture.

This may also affect your personal life if you are in a personal relationship where your partner is not financially frugal with their spending.

It requires short-term sacrifices such as cutting down on the nonessentials, which will provide the initial capital/money that can be used to invest, which will require working out the essentials you need to live.

Money which has been spent on video games, junk food and other nonessentials goods by making changes to your purchasing choices, in the long run, will lead you to be financially better and mentally better off with money by choosing to invest your money in stocks, personal and professional development as well as a focus on your physical health.

Investing is not just something you do; it will require a lifestyle change which will affect the rest of your life in positive and negative outcomes.

A significant positive is that you will have a growth mindset and learn how to enrich yourselves not just with material wealth but with spiritual health big negative is that you may lose your current friendship group due to different life choices.

The podcaster Chris Williams stated that ‘the worst thing a person can do is meet the person they could have been’ When you meet people, this may be what you are to them, the person they could have been just by making small incremental changes which giving you a better life.

Investing

When beginning your journey in developing a financial portfolio, it’s necessary to understand yourself and your risk tolerance; for instance, by investing in low-cost index funds like the S&P 500, you are almost consistently guaranteed a 10% return on your investments each year.

This is because your money is distributed in several different stocks in different companies, which spreads the financial risk rather than investing all your money in one organisation like Lloyds Banking Group.

The next option for investing is traditional stocks; a stock is a piece of a company you may buy and own; this can give you dividends where you may receive some money due to being an investor.

The other method of making returns on your initial investment is to buy a stock when it is low and sell when high for instance, if a stock costs £85 and the purchasing price goes up to £415; you can sell that stock when it is high.

A piece of stock will fluctuate from minute to minute or second to second; choosing a digital stockbroker like Robin Hood is more beneficial than using a physical stockbroker to sell your stocks for yourself due to the sale or purchase happening instantly.

When making your choice and whether to use a stockbroker that can also have the power to buy and sell stocks in your name, or would you be more comfortable making your own choices and not having to pay a commission to stockbrokers?

Other investment opportunities are in government bonds which have you purchasing a piece of the government debt with an interest rate of around 2%.

These are risky because if the interest rates increase, the government bonds won’t. Also, the currency’s value fluctuates over time due to inflation which will erode the purchasing power of the money which you have in government bonds.

This can be a safe option because if the government is stable, you are almost guaranteed to make a return on your initial investment. But please be aware that the currency’s value is cut in half each year due to inflation being an invisible tax on the cash value.

Other options worth considering are minerals such as gold, oil, cobalt and other vital minerals that have high value due to them being essential either for modern living and technologies or just being something historically high value and is a suitable means of exchange like gold.

For example, during the American Civil War, from 1861 to 1865, the Confederate Dollar became worthless due to the currency no longer having the confidence of its backers due to the Confederate States of America losing the American Civil War and international support for the independence.

This is why the Confederacy made all its purchases in the later stages of the war using gold coins because it was a guaranteed and secure means of exchange of goods and services.

What cash is at the end of the day is the means of exchanging goods and services without the use of a bartering system.

This is why currencies and powerful currencies that the United States of America is guaranteed to be a suitable method of exchange due to its economy, industry, population and history of financial security.

Build Your Library

The final step in the beginner’s guide to building a financial portfolio is to develop your knowledge using various sources such as books, websites, and thinkers and authors knowledgeable in financial matters and making investment prices.

For example, Peter Zeihan is an American author, writer, and analyst focusing on geopolitical impacts and demographics affecting the world and investment choices.

He publishes his own YouTube videos on this topic regularly in five minutes chunks, so they are easily digestible for viewers and listeners if you don’t have the time to read his books.

Looking at figures with different points of view and skill sets can give good advice on what investment choices you wish to make in the short, medium or long term.

Knowledge is not just something you do by reading one source of information; you become knowledgeable about a wide range of subjects for making investments throughout your life.

In the words of Jim Rohn, an American entrepreneur and personal development coach, ‘Be a student and not a follower’ In layperson’s terms, study well and make the best-informed decisions you can; ultimately, you must take action.