Build Your Personal Financial Fortress: The Complete Guide to Portfolio Allocation

Many novice investors share the same confusion—why do some people achieve stable growth through investing while others frequently incur losses? The answer lies in whether you understand how to build a scientific investment portfolio. This article will help you thoroughly grasp this concept and learn how to tailor an investment plan suited to yourself.

What exactly is an investment portfolio?

An investment portfolio is a method of investing where an investor, according to certain proportions, holds a collection of various financial assets such as stocks, funds, bonds, bank deposits, and even cryptocurrencies. Its core purpose is simple: maximize returns while keeping risks within an acceptable range.

Many people easily confuse a portfolio with “simply saving money.” In fact, they are very different. Saving in a bank only helps your wealth outpace inflation; but by building a portfolio, you can leverage scientific asset allocation to generate compound growth. Just as a balanced diet requires a mix of meat and vegetables for nutrition, the core philosophy of a portfolio is: “Do not put all your eggs in one basket.”

A healthy portfolio allocation should include high-risk, high-return items (such as stocks and Bitcoin), as well as low-risk, stable assets (like bonds and bank fixed deposits), and even reserve cash for temporary needs.

Age, risk preference, market environment—three major factors influencing your portfolio

Your age determines your investment aggressiveness

The allocation ratio of your portfolio primarily depends on your age. A 28-year-old working professional and a 65-year-old retiree cannot use the same investment plan.

At 28, you have a steady stream of income to supplement your investments. Even if you suffer a 30% loss in a year, being young means you have plenty of time to recover through future income. Therefore, at this stage, you can boldly allocate more to high-risk assets. But at 65, when your income source is basically cut off and you have no chance to make up losses through work, you must choose a conservative, low-volatility portfolio.

Different people’s risk tolerance determines their asset allocation

Some get anxious at the thought of investing, while others see risk as an opportunity. Based on risk preference, portfolios are usually divided into three main types:

Risk-loving type (suitable for young, aggressive investors) Stocks 50%, Funds 30%, Bonds 15%, Bank deposits 5%

Risk-neutral type (suitable for most average investors) Stocks 35%, Funds 35%, Bonds 25%, Bank deposits 5%

Risk-averse type (suitable for conservative, near-retirement individuals) Stocks 20%, Funds 40%, Bonds 35%, Bank deposits 5%

Market environment can change asset performance

For example, stocks in emerging markets and developed markets perform very differently. From 2017 to 2020, both emerging market ETFs (EEM) and Eurozone ETFs (EZU) rose, but EEM’s gains far exceeded EZU’s because high growth in emerging markets brought higher returns.

However, during the market downturn from 2020 to 2022, EEM’s decline (15.5%) was much greater than EZU’s (5.8%). This illustrates why developed markets tend to be more stable—companies are more diversified and risk-resistant. Emerging markets are more susceptible to geopolitical issues and currency policies, leading to greater volatility.

How to allocate your portfolio? This is the most common question

Many know they should diversify investments but are unsure how to do it. Here are some common allocation schemes:

If you prefer conservative investing, you can follow the three risk preference types mentioned above. But if you only want to invest in funds, there are also specific fund portfolio schemes:

Risk-loving fund portfolio Stock funds 60%, Bond funds 30%, Commodity funds 10%

Risk-neutral fund portfolio Stock funds 40%, Bond funds 40%, Commodity funds 20%

Risk-averse fund portfolio Stock funds 20%, Bond funds 60%, Commodity funds 20%

If your risk tolerance is particularly high, you can also allocate $100–$200 from your portfolio to ultra-high-risk tools like forex and cryptocurrencies—provided you can afford to lose this money.

Practical case: How to create a portfolio for yourself?

After all the theory, it’s best to illustrate with an example.

Suppose Xiao A is 28 years old, has NT$1,000,000, and wants to build a personal investment portfolio. How should he do it?

Step 1: Determine risk preference Xiao A is young, eager for wealth growth, and falls into the risk-loving investor category.

Step 2: Set investment goals Specific goal: turn NT$1,000,000 into NT$2,000,000 in 5 years, a 100% increase.

Step 3: Choose specific asset classes Based on the goal and risk preference, Xiao A selects stocks, funds, and bank fixed deposits.

Step 4: Decide on specific allocations

• Stocks: NT$500,000 (50%)
• Funds: NT$300,000 (30%)
• Bank fixed deposit: NT$100,000 (10%)
• Reserve funds: NT$100,000 (10%, for emergencies)

Why reserve funds? Because after setting up the portfolio, you need to lock in this amount and avoid moving it around freely. Without reserves, unexpected expenses could force you to prematurely liquidate investments, resulting in losses.

Portfolio also carries risks—how to hedge against them

Building a portfolio is not a one-time task. Market fluctuations, industry rotations, inflation, and black swan events can all disrupt your plans.

Most importantly, the risk of your portfolio also comes from your own mindset. After setting up your portfolio, the biggest test is not your capital but your psychological resilience—can you stay rational when facing short-term losses?

Specific strategies:

• Pre-set stop-loss and take-profit points: Define target prices in advance to prevent impulsive decisions during market volatility.
• Maintain diversification: Continuously add assets from different regions and sectors to spread risk.
• Regular review and adjustment: Evaluate your portfolio performance quarterly or semi-annually, and make adjustments based on market changes.
• Keep a long-term perspective: Don’t overreact to short-term ups and downs; stick to your investment plan.

The 5 most common questions from beginners

Q1: Can I build a portfolio if I have very little money?
Absolutely. The minimum investment in funds is only NT$3,000, and CFD (contracts for difference) platforms often have even lower thresholds. As long as you meet the minimum investment amounts for each asset, you can build a portfolio.

Q2: Will I definitely make money if I set up a portfolio?
Not necessarily. A portfolio is just a tool to balance risk and return; the actual gains depend on market conditions and the performance of selected assets. Regular monitoring and adjustments are necessary.

Q3: What knowledge do I need to build a portfolio?
Mainly a basic understanding of the assets you choose—knowing their outlook, entry and exit points, and financial knowledge, along with some data analysis skills.

Q4: I don’t know how to allocate—can I copy someone else’s portfolio?
You can refer to similar target portfolios, but it’s best to consult a financial advisor for personalized planning based on your financial situation.

Q5: Once I set up my portfolio, can I just leave it alone?
Absolutely not. After setting it up, you need to regularly evaluate and adjust it, because market conditions may deteriorate the outlook of assets you previously favored. Timely adjustments are essential.

Final advice

The core of building a portfolio is to replace luck with scientific methods. Regardless of the amount or your age and gender, you should establish an investment portfolio that matches your risk tolerance and life stage.

Remember: a portfolio is not for overnight riches but for steadily growing wealth while controlling risks. That is true investment wisdom.