Pocket finances. Start your investment portfolio now.

It's hard for me to admit when I am wrong. Based on my experiences, I believe this is a quality present in many people, perhaps too many. If you can prove me wrong, I'm willing to concede. However, depending on my mood, you may need to be patient with me. All of this introduction is to confess that I was mistaken.

To soothe my wounded ego a bit, I'll say in my defense that to err is human. And that should make everyone happy. It was my mistake when I recommended opening a SIALP in my finance post. After studying and reading more about the topic, I suggest you change your strategy. It's better to start building a solid investment portfolio.

The ideal investor is a patient person who invests for the long term, enjoys the journey rather than just the outcome, is not swayed by emotions, has convictions but is eager to learn.

Francisco García Paramés

Build your portfolio

I mentioned in the last post on pocket finances that investment funds will be great allies when it comes to saving for the future. Well, let's see how to start investing in funds and how to design a customized portfolio.

For now, it's enough to know that investment funds come in two types based on their risk profile:

• Fixed-income funds: lower risk and lower interest. You take less risk investing your money in these funds, but the reward they offer is also smaller.
• Equity funds: higher risk and, therefore, higher interest. They pay more for you to put your euros into these funds.

Let's see how much of each type is suitable for you, based on your profile and age.

Assess your risk

The experts in investment funds say that the ideal is to have a portfolio with a variable proportion of risk. In other words, that your percentage of fixed funds vs variable funds should change with your age.

They recommend the following standard formula:

% variable funds = 110 - your age

In my case, I have a portfolio with 80% variable funds and 20% fixed-income funds. No matter how we look at it, we will keep getting older, so we will have to adjust these percentages.

Successful investments are about managing risk, not avoiding it.

Benjamin Graham

The best manager

When it comes to deciding where to go to buy different funds, it's worth considering which manager charges you less. After my research a few months ago, I concluded that the best platform to start with was Myinvestor.

This bank, managed 100% online, allows you to invest very small amounts of money, starting from €1. Furthermore, it offers you a wide range of funds from different countries or regions.

The most interesting aspect is that their management fees are really low. In other words, they make you pay very little money for acting as an intermediary.

In this Hormiga Capitalista post , you have a comparison of different platforms, in case you're interested in delving deeper. This post is very comprehensive to start understanding how things work.

Choosing Funds

When it comes to selecting the funds that will make up my portfolio, I primarily focus on two points:

• Historical performance. What interest has that fund yielded in the past?
• Management costs and associated fees.. What it costs you to have that fund, just for having it in your portfolio.

This living file prepared by Dullinvestor on the Rankia website serves as a reference for me.

Given the current inflation rate and considering the savings accounts offered by major banks, I wouldn't invest in any fund with a return of less than 5% for fixed income and 10% for equities.

Let interest do its job

Once you've chosen the funds you're going to acquire, the only thing left to decide is how much you're going to invest. To start, and if you don't have much capital, I would begin with a small amount. For example, €50 or €100 per month.

The final lesson for today is that it's better to invest gradually than all at once. In other words, it's better to invest once a month than once a year, even if it's the same total amount. This aims to avoid volatility. Put simply, it's about minimizing potential losses by buying when the fund is very expensive.

I hope that with this post, you know how to start investing and creating your portfolio of funds. In the next post, I will talk to you about roboadvisors robo-advisors and provide more information about index funds to help you become even less fearful of them.

See you soon and happy reading!