How to start an investment portfolio as a busy parent

It’s like déjà-vu.

You know, that conversation about what to do with the money in the bank sitting there in your bank account.

You know it’s losing value as every year passes. And yet…

Every time you talk to your partner, you agree to do something with it.

But you never determine what!

There’s so much information out there it’s enough to make your head explode.

And just as you come up with a nugget of an idea, your partner dismisses it for being too risky.

After all, you’ve got mouths to feed, and education to pay for, and that’s even before thinking about retirement.

It’s just so frustrating. And between your work and your family life, there’s hardly any time to think about investing.

Hence, you go around in circles, again and again, and again.

If only you could find some way of learning how to invest your money efficiently that doesn’t require time to understand, vast knowledge to manage and won’t gamble away your precious income.

Well, you know what? There is. 

And the key to it is knowing what you want to achieve, not how. 

Even better, once it’s up and running, you only need to check on it, and perhaps tweak it, a couple of times a year. 

But the best bit is you can rest assured knowing that your money is working for you while you can get on with the rest of your life.

It’s the investment portfolio approach to investing, and it’s the best way of investing for beginners and busy people. Read on to find out how to start an investment portfolio.

What is an Investment Portfolio?

An investment portfolio is a collection of financial assets such as stocks, bonds and commodities. Effectively, anything you plan to buy and sell can be part of it. This includes art or coin collections, pension funds or even money sitting in bank accounts.

However, it’s more than just a collection of assets. 

It’s also an approach to investing.

When you invest using a portfolio approach, you assess the success of your investments collectively, rather than evaluating each one individually.

It’s this mindset that helps you to protect your capital by avoiding financial disasters and reducing your investment risk.  

Why a portfolio approach works

Diversifying your investments in a portfolio acts as a brake on any potential monetary losses. It’s real investing.

For example, if you’re an employee at a large corporation, the company may contribute to your pension fund with its shares.  But, what happens if the share price drops or the firm collapses?

If this is your only pension fund, the financial consequences for you will be horrendous. 

This is what happened to many Enron employees when Enron collapsed in 2007. Not only did they lose their jobs they also lost their pensions.

However, by diversifying your pension fund and any other assets you own, you spread your financial risk. And provided you invest sensibly, any value lost from those company shares can be made up with other assets.

But, there’s another benefit too.

It’s a reduction in the volatility of your returns, lowering your investing risk even further.

Start an investment portfolio: A financial comfort blanket for an uncertain future

No one knows what the future holds.

You may currently be assessing five different shares to add to your share portfolio. One of them may have performed really well last year.

So, what do you do?

Do you increase your risk and use all your money to buy that one share, or do you split your funds equally between all five?

As we’re consistently warned by financial experts, information on past performance is not necessarily a guide to the future.

This means that you could put all your money in that one share that’s done well in the past, but because you don’t know what the future holds, you may as well pick any share to purchase at random because you can’t guarantee that same well-performing share will continue to do well.

According to a study by the Chartered Financial Analysts Institute (CFA Institute), the return on an equally weighted portfolio of five shares is the same value as the average returns of the individual shares. 

And, this is the same amount as the expected return from buying a random share.

However, with the future unknown, buying all five shares reduces significantly reduces your risk of not making that return.

Therefore, the portfolio approach to investing affects your risk and not your returns.   

It’s a holistic way of looking at investing and explains why leaving all your inheritance money sitting in your bank account is not a great idea.

What if the bank collapses? (Remember, there is usually a limit on how much governments will guarantee.) 

What if the inflation rate continues to be higher than interest rates? (You’re losing more money as time goes on.) 

These are all great reasons to start an investment portfolio.

And this is how you can do it when you’re too busy to even think about one, let alone manage it every day.

Step 1: Know what type of investor you are

The first step is to thoroughly understand your own personal financial objectives and constraints. 

It’s a step that’s so often overlooked but is absolutely essential for providing the direction you need to add the right assets to your portfolio.

But it’s about more than just your circumstances. It’s also about what type of investor you are.

If you have time to continually research and monitor your own investments, I envy you! But, chances are, if you’re a busy parent or professional, you need a portfolio that runs itself with little effort.

So, if you fit into the latter category, how do you start deciding how to split your portfolio assets of bonds, stocks and cash?

First, ignore your age 

Yes, really,

Conventional wisdom says that how much risk you take depends on how old you are. The consensus is that as you get older, you need safer investments because you’ve less time to recoup the losses. 



What if you’re a millionaire pensioner already on a good income intending to pass your investments on to your grandchildren who have years of investing ahead of them?

What if you’re in your 20s and are saving for a wedding and a house? Why on earth would you want a risky investment?

And emergencies needing cash can happen at any time and at any age. 

So, keep some cash in your portfolio and think about what you want to do with your assets. Your age doesn’t need to be a factor.

Second, understand your circumstances  

What will you do if the stock market crashes? Will you stop investing, sell your stocks and keep the cash, or buy bonds?

It’s easy to decide to sell. After all, everyone else is doing it. It’s human nature. This is why the markets keep crashing, and bond prices go up!

It’s also why it’s a good idea to keep at least 25% of your portfolio in bonds, as a support to help you resist the urge to sell your stocks.

But, there are other circumstances to consider too:

  • Are you married? Does your partner have a well-paid and secure job?
  • Do you have children? Do you, or will you, pay for their education?
  • Do you have any other dependents, such as elderly parents?
  • Are you likely to inherit some money?
  • Are you self-employed?
  • If so, how long is your business likely to survive?
  • Are there any external factors, such as energy prices or interest rates, that could affect your job security?
  • Do you own your own home, or are you renting?
  • Do you have a secure and diversified pension fund in place? If so, what is it invested in?
  • Do you need your investments to support your income? Or can you afford to invest for potential capital gains instead?
  • How much money can you afford to lose without impacting your life plans?

This is definitely not an exhaustive list, but it does give you an idea of the questions to ask yourself. The answers will determine your need for cash and your tolerance for investment risk.

It’s the nature of your risk tolerance that guides you in your asset allocation choices. This is why it’s so important to understand your own unique situation.

Once you know your goals, you’re ready to start an investment portfolio. 

Step 2: Start the right investment portfolio

What is a good portfolio for a beginner? 

Beginners, like busy people, need a portfolio that runs on autopilot and doesn’t recklessly gamble their money away. 

This means ignoring the more risky assets with large amounts of price volatility, such as commodities and currencies.

This is also why the portfolio approach is essential for busy people because it reduces the risk of losing your money, even from a bank account.

The best way to start is to create an initial investment portfolio comprised of high-grade bond bonds (i.e. NOT high-yield bonds), cash and certain stocks. Ignore everything else.

However, bear in mind that the reason stocks are riskier than bonds or cash is that their prices are more volatile. But, with higher price volatility comes the opportunity for higher returns as the prices are going up and down to relatively extreme levels, and more often. The trick is to balance the trade-off by setting a target portfolio percentage for bonds/cash vs stocks.

Once you understand your own situation, you may decide to take a higher risk with a larger percentage of stocks in your portfolio. In this case, keep at least 25% of your portfolio invested in bonds or cash.

However, if your risk tolerance is low, keep a maximum of 75% in bonds or cash.

You may wonder why I’m not suggesting 100% bonds/cash for a low-risk portfolio.

It’s because stocks and bonds often work in a complementary way. When stock prices go up, bond prices drop, and vice-versa. Consequently, your portfolio needs to balance the two to prevent losses as much as possible.

Remember, with portfolio investing, it’s not about single investments but about how all your investments perform together as a team.

So, the good news is that once you’ve decided on your target percentages for bonds/cash and stocks, they only need to change as your circumstances change. Otherwise, rebalance your portfolio to match your ratio every few months to keep the ratio constant.

Use the asset ratio as your only guide – don’t buy or sell because the financial markets are going up or down. This is so important. The success of your portfolio depends on your self-discipline to ride the peaks and troughs!

Once you’re happy with your ratio, the next step is to delve deeper into your choice of securities.

Security analysis for newbies


The key to good stock choices, when you don’t have the time to research individual companies, is diversification.

With a selection of companies in your portfolio, you not only reduce your risk of loss but improve your chances of making a good choice!

Investing mastermind, Benjamin Graham had four rules for stock selection that work really well for busy people:

  1. Choose a minimum of 10 stocks, but no more than 30;
  2. Only select large, well-known companies with relatively little debt;
  3. Make sure the company has at least 10 years of paying dividends in its recent history; and
  4. A price-to-earnings (P/E) ratio of no more than 25. This ensures you don’t purchase any ‘growth stocks’ where the share price is based on future optimism and not on company assets. (Think Tesla…)

I think these are great rules to follow for a portfolio that runs on autopilot because your choices will likely be sensible investments that will provide you with an income.

Alternatively, if you’ve only a little money, or you simply don’t want to choose your own stocks, consider a pooled investment (see below for details) for your stock portfolio portion. These offer the benefits of diversification without having to buy individual shares.


Bonds are little packets of debt, usually issued by a government or a corporate entity, that are bought and sold in financial markets like stocks.

Effectively, you lend these organisations a set amount of money, and they pay you interest on it, known as a coupon payment. 

The risk in holding bonds is the risk of default by the issuer. 

With government bonds from developed countries, this risk is almost non-existent because the government will guarantee the payment. 

This is why government bonds are considered ‘safe’ assets. And, they may pay better interest than a bank current or checking account! 

In contrast, high-yield bonds – “junk” bonds – may have a high chance of default. (The high-interest payment is the reward to the holder for taking on risky debt.)

There are three basic choices with bonds:

  1. Taxable or tax-free;
  2. Short-term or long-term, and
  3. Bonds or bond funds.
Taxable vs tax-free

Make sure any taxable bonds are placed into a sheltered account such as an ISA (in the UK) or 401(k) (US).  Then you won’t pay tax on the income.

However, any tax advantages from tax-free bonds are wasted inside these accounts, so keep them outside.

Short-term (less than 1 year) vs long-term (up to 30 years)

Bond prices move with interest rates but in opposite directions. If interest rates fall, bond prices rise and vice versa. 

But, a short-term bond’s price moves less than a long-term bond’s price, meaning if interest rates drop, a long-term bond will outperform a short-term bond. However, if interest rates rise, a short-term bond’s price drops less than a long-term one.

Why not consider an intermediate bond of 5-10 years and get the best of both worlds?

Bonds vs bond funds:

The downside with bonds is there may be a minimum purchase level, and like stocks, you need to diversify your purchases with a minimum of 10 purchases.

For those without the capital to do this, bond funds are a great choice. They often also provide a monthly income that can be reinvested without paying a commission – but check the small print!

Premium Bonds (UK) are another option. However, these are more like savings accounts where the interest paid is determined by a monthly prize draw. If you’ve got a decent amount of money (over £5000) to invest but may need access to it and/or pay tax on savings interest, they can be a good investment. However, the chances of winning the big prize are almost zero! (This is a great article on premium bonds.) 

If you’re in the US, take a look at savings bonds.

With all this talk of bonds, don’t forget to keep some cash to hand for any emergencies. 

Pooled investments – here’s one I made earlier

A pooled investment can be a great choice for either the bond or share sections of your portfolio. Or even both.

However, the choice of products available is mindblowing.

But, there are two main general categories for smaller individual investors (i.e. under £1 million to invest) to help you decide.

  1. Mutual Funds. These are investment pools where each investor has a pro-rata claim on the income and value of the fund. The funds differ in the type of assets they invest in. The four main types are stock funds (domestic and international), bond funds (taxable and non-taxable), hybrid/balanced funds and money market funds (taxable and non-taxable).
  2. Exchange-traded funds (ETFs). These are pooled funds traded on the markets like stocks. They are typically index funds, meaning they’re designed to track a certain index, such as the FTSE 100 or S&P500. One big advantage of these funds is they’re often passive, meaning they’re not actively managed by a fund manager. This can significantly reduce your costs.

Once you’ve chosen your assets, and in the right proportions for your circumstances, the next step is to leave them working for you in the background.


Step 3: Get feedback (from your portfolio)

Don’t forget:

  1. Check your portfolio every few months.
  2. Stick to your target asset ratio. Rebalance it if necessary by buying or selling shares or bonds.

That’s it.

The portfolio will work on autopilot for you.

Investment portfolio examples

Here are three examples of investment portfolio mixes to run on autopilot for busy people:

  1. 25% stocks / 50% bonds / 25% cash
  2. 50% stocks / 25% bonds / 25% cash
  3. 75% stocks / 10% bonds / 15% cash

The key is to make sure you have enough readily available cash to cover any emergencies that may arise and that you don’t purchase more stocks than you have the risk appetite for.

Remember that stocks and bonds of the type I’ve recommended in this blog post can be sold at any time – they’re highly liquid, so they don’t tie up your money like many higher-interest savings accounts.

And don’t forget the cash in your bank account and your pension fund investments are also part of your portfolio.  

Get on the path to financial freedom the easy way

Not knowing what to do with your money can be incredibly frustrating. 

But you don’t have to leave it in the bank when you know it’s losing value.

Learning how to start an investment portfolio is easier than you think. You don’t need to spend hours researching many different assets to be effective in your investing.

Use the above guidelines to start your own investment portfolio adapted to your circumstances and stick to your asset ratios.

It may take a few months, but you’ll start to realise the benefit of a portfolio approach to looking after your money.

No more deja vu conversations about losing money or risking your financial future.

You’ll be more content and at ease with your financial situation. 

And just imagine your money working for you, on autopilot, in the background while you get on with your life.

Go, take that first step. It’s as easy as sitting down for an hour or so with a coffee. 

But, it may change your life.

Have you started an investment portfolio? What mix of assets do you have in it?

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