MR MONEY MAKER: How to build a profitable portfolio (part 1) 

MR MONEY MAKER: Justin Urquhart Stewart’s guide to building a profitable portfolio (part 1)

Why Plan?

If you are planning to invest – don’t. Instead, invest in planning. That may sound trite but in my experience, planning is vital for all investments, even if you are just going to have a punt!

Sadly, we have never educated our children, let alone adults, about investment, borrowing and finance. Almost all of us have had to learn through our mistakes, me included.

Don’t rush: In Justin’s experience, planning is vital for all investments, even if you are just going to have a punt 

Only now have we started to teach the very basics in schools but for me it should be a key part of the maths class. Simply put, if you don’t know what you want to achieve, you are never going to get there.

Also, your financial plan is not just about you but about your family and their future.

What are your goals?

If you just want to have a bet, then that is where horse racing comes in, and there are some excellent tipsters for you.

However, what we all want to do is grow our wealth, so that when we get to a point of time such as retirement, we can open the box with confidence that there will be some financial security for your future.

What you don’t want is to find nothing but a few rattling pennies and an old share certificate. So first I would be planning for the day that I won’t be having a regular income and that means a pension.

Assuming you are not one of the lucky but ever diminishing number with a final salary scheme, then you are going to need a pile of money capable of providing you with enough income for the rest of your years both for you and your family.

The question is: how much will you require to live on? What do you need for bills, reasonable holidays and some luxuries? Will you have repaid all your debts and your mortgage? Maybe you would say £2,000 a month.

Your state pension should chip in another £750 per month but to have this modest income then you will need to have at least £500,000. 

Yes – half a million and that is on the assumption that your investments will provide you a return of 5 per cent after costs. Ouch!

How long have you got?

The longer you have, the better. I want to make pension savings compulsory for everyone from the day they are born, whether it is into a pension or something like an ISA but for life – a ‘LIFA’, so parents and grandparents can contribute.

Which types of investment?

So how do we achieve this? Steadily, over time. Investing is a longer-term game. Short-term wins are wonderful but never reliable. 

Longer-term returns on a ‘balanced’ investment portfolio of shares, bonds and some other assets is the answer, and letting them grow steadily over the years.

This is not as difficult as some would have you believe, and over the next few weeks I will lead you through some of the best ways to meet your investment goals.