Build a portfolio that survives a crisis — and yourself
In 6 min you'll know: how to write a personal investment policy before you invest your first euro
In Block 2, Lesson 8 you learnt the fundamentals of investing: diversification, compound cost and the role of time. Now we are going to build a long-term portfolio — not the portfolio that makes you feel good today, but the one you will be able to hold when the market drops 30% and your instinct screams "sell everything". The rule: write a personal investment policy before investing your first euro — and follow it when your emotions tell you otherwise.
Before you continue: before investing, what's the first thing you must check about the financial intermediary — and where do you find that information?
(Answer in the next paragraph.)
A personal investment policy is a document where you define: your time horizon (when you will need the money), your risk profile (how much loss you can bear without panicking), your target allocation (percentage in shares, bonds, property, cash) and your rebalancing criteria (when you adjust the portfolio back to the original allocation). Without this document, you are investing based on how you feel on the day — and emotions are the worst financial adviser there is.
The long-term investor's greatest enemy is not the market — it is themselves. Behavioural studies show that individual investors systematically buy at the top (when everyone is talking about shares) and sell at the bottom (when panic sets in). The result: the average investor earns lower returns than the funds they invest in, because they enter and exit at the worst possible times. The solution is not more information — it is more discipline. Automatic periodic investing (DCA), annual rebalancing and zero portfolio-checking outside scheduled dates are the three rules that protect you from yourself.
Diversification is not "having lots of shares" — it is having exposure to different risk factors: geography (Portugal, Europe, US, emerging markets), asset class (shares, bonds, property), sector (technology, healthcare, energy, financials) and currency. Ask yourself: if you want to diversify with a single instrument, an accumulating global ETF — which reinvests dividends and covers thousands of companies — can be one of the most efficient ways to do it. Compare the TER with alternatives before you decide. The (Portuguese securities market regulator) registers and supervises the ETFs available in Portugal.
Notice: Mowei is a financial education and comparison platform. We are not investment advisors authorised by the CMVM. This lesson is general information, not personalised advice. For decisions about specific products, consult a financial intermediary registered at investidor.cmvm.pt.
Write your personal investment policy (5 min) →
Your promise: This month, Sunday at 10am, I will write my personal investment policy before investing another cent.