How to Build and Buy a Portfolio in 5 Steps - No BS Investing
Posted 256 views September 28, 2021, 13:10 - Dylan in Investing

How to Build and Buy a Portfolio in 5 Steps

Your investing tool kit is ready to go. You understand the fundamentals of investing, as well as types of investment vehicles and portfolios. 

Time to put it all into practice and take action. Below, learn how to build an investment portfolio, step-by-step, to help you start generating wealth as soon as possible. 

Key Takeaways:

  • To build a portfolio, select a trading platform through the brokerage of your choice.
  • Use this platform to practice buying and selling individual stocks and ETFs (you can do this through a demo or simulation account). 
  • Select a portfolio that matches your personal situation and risk tolerance. You can choose a pre-made portfolio or allocate assets on your own.
  • Buy the portfolio. This means that you buy the specific portfolio assets such as ETFs or stocks within the trading platform. 

Step 1: Select a Trading Platform

Get started investing with a trading platform. But first, you’ll need a financial brokerage account – it will give you access to a software where you can invest. Popular brokerages include

You can also choose your own brokerage that’s not on this list. Hint: If you’re not ready to invest real money, select a brokerage that offers demo or simulation accounts. You can then practice investing without actually using money.

Once you create an account, you can fund it. The brokerage’s website will guide you through a list of steps to connect your bank account. Some brokerages have a minimum funding requirement while others let you put in $10, $50, $100 – whatever works best for your budget!

Through the brokerage, you’ll have access to trading software. There are web-based, app-based, and desktop app software. The options depend on the brokerage. 

Here’s an example of what the trading software looks like with Fidelity Investments:

how to build an investment portfolio

Don’t freak out about the seeming complexity of the software. Familiarize yourself primarily with the buttons that allow you to buy and sell. Also, watch YouTube tutorials for your specific brokerage that teach you how to use each platform. 

Step 2: Buy and Sell Stocks

Before buying a full portfolio, you can practice buying and selling investments (we recommend using a demo or simulation account for this step). Here’s how to buy and sell individual stocks

In your trading software, you can type in a ticker symbol for a specific company such as AAPL for Apple. Although it will look different based on the software, select what type of investment you want to buy from this company. In this case, look for stocks.  

Next, select “Buy,” and identify how many shares you want to buy. For example, maybe AAPL shares are selling at $100 apiece. You’ll normally choose to buy at Market price (Market price will simply buy the stock at the best price). 

Click submit. Congrats! You’ve bought stock. The price changes day to day so the price you receive the stock at now could change tomorrow.  

An example of buying and selling salesforce stock through M1 Finance.

Now say that you want to sell. Perhaps the price of the stock has gone up and you could make money on the difference. Choose to “Sell” at the Limit price (aka the ideal price you want to sell – or buy). 

Maybe you’d be willing to sell your AAPL stock if it goes up to $105. Submit your order at this amount. The software will automatically sell your shares if the price reaches this amount.   

Step 3: Buy and Sell ETFs

Now that you’ve bought and sold a stock, let’s look at how to buy and sell an ETF. If you remember, an ETF is a mix of stocks and bonds placed into a single fund. 

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To buy an ETF, go to your trading software. Type in the ticker number for an ETF such as VOO (Vanguard 500 Index Fund ETF). You can choose to buy right away using the “Buy” button and specifying how many shares you want to buy.

But how do you know what’s the right amount of shares? Let’s say you have $5,000 to invest. You want to invest 30% of your portfolio in the S&P 500. $5,000 x 30% = $1500. You can buy $1,500 worth of this ETF. To convert this number into shares, look at the ASK price of the ETF.

Maybe the price is $300. Divide $1,500 by $300. This equals five. You can buy five shares. Under “Quantity,” put in the number “5” and submit your order. 

To sell, click “Sell” at Market or Limit price. 

Step 4: Select a Portfolio

Now that you understand how to buy and sell stocks and ETFs, let’s select a portfolio and determine how you’re going to allocate your assets. 

This is the most difficult task as an investor because these decisions are based on many factors — factors that are personal to you such as your risk tolerance, if you’re an active or passive investor, etc. But it’s also the most important decision you’ll make to achieve a strong portfolio performance!

To help you get started, check out the three types of portfolios:

  • Equity portfolio
  • Equity & bond portfolio
  • Equity, bond, & gold portfolio

To select a pre-made portfolio, you can use sites like Portfolio Charts and Lazy Portfolio ETF. Check the performance of each portfolio to determine if you’re comfortable with their historic returns. Or you can create your own portfolio by picking out assets and deciding how much you want to invest in each. Learn more about this step here. 

Just know that it takes time to pick the right portfolio for you. If you’re unsure right now, go with the portfolio that’s less risky. You can always update your portfolio later on. 

Note: If you’re still not sure how to allocate your assets on your own (aka what percentage should be in bonds, stocks,etc.), you can use an investment advisor. However, investment advisors normally charge high fees which can significantly cut into any money made. 

If you take time to learn about investing on your own (which you’re doing now!), you can save on those fees. 

Step 5: Buy a Complete Portfolio

Once you’ve decided on a portfolio, it’s time to buy it (e.g. invest in your chosen ETFs).

Say that you’ve decided on the Ray Dalio All Weather Portfolio. With this portfolio, you’re going to buy five ETFs:

  • Vanguard Total Stock Market (VTI)
  • iShares 20+ Year Treasury Bond (TLT)
  • iShares 3-7 Year Treasury Bond (IEI)
  • SPDR Gold Trust (GLD)
  • iShares S&P GSCI Commodity Indexed Trust (GSG)

To help you keep track of your portfolio, take out a piece of paper or create a spreadsheet. Write down all of the investments you’re going to buy. Also write down your portfolio amount. Let’s now say that you currently have $2,000 to invest. That’s your portfolio amount.

Next, write down your allocation for each investment as a percentage and the amount in dollars. 

To know how many shares you’ll buy of each ETF, check the price of each one within your trading software. Divide the amount of money you want to invest in each ETF by each price (round the numbers if you’ve got decimals). You’ll then have the number of shares. 

how to build an investment portfolio

Through your trading software, purchase each ETF based on the number of shares you want to buy. Maybe you’re purchasing six shares of VTI at $225 per share. Click “Buy.” Rinse and repeat with the remaining four ETFs. 

You now have a portfolio. The buying process is very similar no matter what portfolio you choose or trading software you use! Invest money into your portfolio every month – your portfolio amount will steadily grow.

Note: There are some brokerages, like M1 Finance, where you choose the portfolio to auto-invest in. It will automatically allocate your money into specific investments. There’s no buying and selling on your end. If you want to be a hands-off investor, this might be an option for you!

Take action with your own investment portfolio

Learn even more about building and buying a portfolio with the Complete Investing Course (Stocks, ETFs, Index/Mutual Funds) on Udemy. This course breaks down complex topics like stocks and building a portfolio into easy-to-understand concepts. Check out the course here

One Reply to “How to Build and Buy a Portfolio in 5 Steps”

    You’re in good hands

    Elisabeth O. is an MBA graduate with a specialization in International Finance & Investments and over six years of financial writing experience. She is passionate about long-term investing to build wealth, avoids day trading and speculations, and loves a good Warren Buffet quote.