8 steps to build a solid investment portfolio

12 August 2024 by National Bank Direct Brokerage

A young woman building a solid investment portfolio by following the eight steps.

Investing in the stock market offers exciting opportunities for financial growth, even for those new to investing. Understanding the fundamental steps involved in building an investment portfolio can make the process more approachable. Here are eight key steps to consider when building a solid investment portfolio to help manage and potentially grow your assets over time.

In this article :

#1 : What kind of investor are you?
#2 : Identify your investment style and make a plan
#3 : Choose a brokerage platform
#4 : Open an investment account
- Choose the right kind of account
#5 : Build an investment portfolio
- Choose the right stocks and ETFs
#6 : Diversify your portfolio
#7 : Use the right tools to make investment decisions
#8 : Review your portfolio regularly

Step #1: What kind of investor are you?

Typically, investors have two choices: self-directed investing or working with an investment advisor. Investing through an advisor involves paying a regular fee or percentage to a professional who provides advice on investment decisions and make trades on your behalf based on your financial goals and risk tolerance.

On the other hand, self-directed investors manage their investments by themselves. This approach offers greater control and flexibility but also comes with more responsibility, as you must oversee and manage your investment portfolio. Most self-directed investors use online brokerage sites, where fees may still apply. However, investors using the National Bank Direct Brokerage online brokerage platform, can benefit from $0 commission on all online stock and ETF transactions.

To know more about beginning your self-directed investing journey, consult our article.

Step #2: Identify your investment style and make a plan

Once you’ve decided on the type of investor you want to be – working with an advisor, self-directed, or a mixture of the two – it's important to identify an investment style and develop a plan that aligns with your financial goals, risk tolerance, and time horizon.

What is your end goal?

Your investment end goal will help you determine a time horizon. For instance, someone who is 25 years old and saving for retirement at 65 will have a different time horizon and investment strategy than someone investing towards a down payment on a first home within the next five years.

Are you planning on purchasing a house? The FHSA is available at NBDB. Learn more here.

Consider the stage of your life and your investment goals: Are you just starting your career? Are you mid-career and considering a shift? Are you looking for regular dividend payouts to increase your disposable income? Having both long- and short-term goals is fine, as they help you target an investment strategy and approach.

How much money do you want to invest?

The amount of money you can or want to invest will also help guide your choice of investment products. Remember that different investment products carry different fees and costs. There is no fixed amount required to start investing, but certain products may have minimum investment requirements.

What is your risk tolerance?

We might think a risk is worth taking, but can we afford the cost if things go the wrong way? Investors should always be asking themselves this question, because at the end of the day, risk tolerance and risk willingness can be two very different things. Ideally, the two should balance out.

Generally, higher risk can mean higher returns but also greater potential losses. Ensure your investment choices align with your level of risk tolerance, as it's important to be able to weather potential losses.

Your investment goals, the amount you have to invest, and the level of risk tolerance you are comfortable shouldering will shape your investment plan and drive your investment style. There are various investment strategies to consider, including day trading, buy and hold, technical analysis, value investing, growth-oriented investing, dividend investing, and low volatility investing.

Step #3: Choose a brokerage platform

Once you've identified your investment style and devised a strategy, and if you've decided to manage your own investments, the next step is to open an investment account. Choosing a reputable online brokerage platform is crucial. A site like National Bank Direct Brokerage (NBDB) offers numerous investment account options with access to a wide range of investment options, tools, and resources for both new and seasoned self-directed investors. When selecting a brokerage platform, consider factors such as simplicity, associated fees, available investment accounts, and the enterprise’s reputation.

Step #4: Open an investment account

Opening an investment account is typically a straightforward process. It involves providing personal information, selecting from different account types - cash, margin, and registered accounts - and then simply funding your account. Once your account is funded, you'll be ready to start making investments according to your strategy and goals.

Choose the right kind of account

Self-directed investors can choose from a range of different account types and investment solutions. The possibilities include RRSP, RESP, TFSA, and FHSA registered accounts, which have specific tax and saving benefits, as well as non-registered cash, margin, or short selling brokerage accounts.

Step #5: Build an investment portfolio

Building an investment portfolio involves selecting a mix of assets that align with your investment objectives and risk tolerance. A well-diversified portfolio might include a combination of stocks and bonds, as well as real estate and other alternative asset classes that help spread risk and increase the likelihood of maximizing your returns over the long term.

Choose the right stocks and ETFs

When selecting securities to include in your portfolio, it is important to research potential investment opportunities by analyzing company fundamentals, financial performance, industry trends, and market outlook.

In addition to revenue growth and earnings potential, consider factors such as competitive advantages and valuation metrics when selecting individual stocks. Use available stock screening tools, research reports, and market analysis to identify promising investment opportunities. Don’t forget to monitor the performance of your holdings on a regular basis.

For investors working with smaller amounts of money or those who are looking to maximize the diversification of their holdings, ETFs and mutual funds can be a good place to start.

Step #6: Diversify your portfolio

Diversification is one of the most important principles of smart investing. “Not putting all your eggs in one basket” is key to good portfolio management. In addition to careful consideration of factors like risk tolerance, investment objectives, market conditions, and economic trends, asset allocation is extremely important.

Diversification and asset allocation ensure that different asset classes fit together and interact effectively within your portfolio, which reduces risks over the long term. As a result, holding assets in different sectors and classes is a powerful strategy to protect investors from significant shifts in specific industries and overall market volatility.

Step #7: Use the right tools to make investment decision

Investors now have access to a range of tools and resources. When making investment decisions, it is important to use credible sources and the right tools, like those offered by NBDB. Investment research, market data, and financial analysis tools can help you make informed decisions. Whether you're buying stocks, bonds, mutual funds, or ETFs, ensure that your investment choices align with your long-term financial goals and risk tolerance.

Discover the NBDB research section

Step #8: Review your portfolio regularly

As a self-directed investor, or even if you work with a financial advisor, it is important to regularly review and reassess your investment portfolio to ensure it remains aligned with your financial goals and risk tolerance. Over time, your life situation and goals may change, requiring adjustments to your investment strategy.

Monitor the performance of your investments, assess market conditions, and adjust your portfolio as needed to optimize returns and manage risk. Consider factors such as changes in your financial situation, investment objectives, and market outlook when reviewing your portfolio. By staying disciplined, doing your research and review, and proactively managing your portfolio, you can maximize your chances of achieving long-term investment success.

Ready to begin your self-directed investment journey?

Open an account

Key Takeaways

Step #1: Decide what kind of investor you are
Step #2: Identify your investment style and make a plan
Step #3: Choose a brokerage platform
Step #4: Open an investment account
Step #5: Build an investment portfolio
Step #6: Diversify your portfolio
Step #7: Use the right tools to make investment decisions
Step #8: Review your portfolio on a regular basis

Welcome to our video on navigating the National Bank Direct Brokerage platform for research. Deciding which securities to add to your portfolio or when to sell can be challenging. NBDB gives you access to research reports and lists of stocks selected and grouped by sector or theme, produced by its partners, National Bank Financial and Morningstar.

Once you’ve logged into your account, there are two places where you can access research reports on the platform. If you already have a stock that you are considering purchasing, you can view the analysis in our quote section. If you're contemplating the purchase of a specific stock, you can find detailed analyses in our quote section. Simply click on "Get a quote" and enter the name or symbol of the stock you're interested in. Once selected this action will redirect you to our real-time quote section, where alongside the quote, you'll find ratings from both National Bank Financial and Morningstar. Additionally, we provide the average analysts' recommendation, and finally, a technical events summary is available for a comprehensive perspective on technical analysis.

To learn more, simply click on this heading or scroll down and select the “Analysis” tab. In this section, you’ll find the NBF target price and the Morningstar Fair value price, along with the date of the latest report. By clicking on “Company” or “Analyst Report”, you can download the latest report or explore previous ones by selecting see more reports.

As you can see, obtaining research analysis on a particular stock is a straightforward process using the "Get a quote" option.
Now, let's consider a scenario where you don't have a particular stock in mind. In this case, navigate to our Research heading and choose "Company coverage" from the dropdown menu.
In this section, you have access to over 1600 Canadian and U.S. reports from the fundamental research departments of National Bank Financial and Morningstar. By using the stock screener, you can quickly filter through this list to create a shortlist of potential candidates for consideration.
Customize your search by country or by source. Let’s start a search using Morningstar, which covers U.S. shares and large cap Canadian ones.
Morningstar ratings range from 1 to 5, with a higher star rating being preferable. We can, for example, select to view all 5-star rated stocks. Next, we click on filter, and we have our list shown in alphabetical order. Once you’ve found a stock that interests you, click on “view reports” to view all existing research reports and then download the relevant documents to consult them.

Let’s go ahead with another example. Now, if we wanted to focus our attention on Canadian securities, we would switch to NBF research and then view the NBF rating. Here, securities can be screened using "Outperform," "Sector Perform," and "Underperform." After selecting all ratings and clicking on filter, you’ll have an alphabetical list. To further narrow down your search you can explore the sector tab and select one of the 10 sectors or search using one of the 24 underlying industries. For example, let’s go ahead with consumer discretionary and here is our list. Now if we look at the industries within this sector, we can be even more specific so let’s select the Retailing industry. Here we have 6 securities and once I’ve selected the one that interests me, I will click on view reports to then select the research document.

Scrolling down, our next section covers recent Rating and Target Price Changes for both research providers. Clicking on the symbol will redirect you to the "Get a Quote" page.

This concludes the Company Coverage section. Next, we'll explore the Publications in the research tab. For investors seeking investment ideas, this section is for you. In the Stock Latest Publications section, you will find a list of the most recent research reports going back several days from NBF and Morningstar.

Conversely, if you are searching for a list of best ideas, our Stock select list will provide you with a choice of U.S. stocks and Canadian stocks to choose from.

Morningstar provides a Core select and Income select list that is updated monthly. Another source is the NBF selection list, which is a list of their analyst’s favorite conviction stocks that is updated monthly and is broken down by sector. Lastly, we have the NBF Strategic List quarterly review, which tracks a model portfolio of Canadian securities broken down by sector and is updated weekly.
If we scroll down the page there is a section on technical analysis where stocks, sectors or indices are analyzed, and commentary is provided.
Our final section is the stock calendar events, here you can find individual daily research reports or consult the daily bulletin, which aggregates the daily NBF research into one document. For those of you who don’t want to log into your accounts daily, there is a weekly report available from NBF named week at glance that is a summary of the previous weeks’ events. You can also find a list of the previous week’s NBF rating changes and an earnings calendar for the upcoming week.

Morningstar also provides a weekly summary of stock ideas and developments in the companies they follow. Within this report, you will find a section called Stocks on Sale which are 4 and 5 star rated, as well as a few highlighted companies.

NBF also provides a monthly publication called Monthly Vision that offers a detailed economic and financial analysis. The NBF Selection list, which was discussed earlier, is exported out of this report. You will also have commentary from the analysts and the list of securities that they cover which includes target prices and other information that can be used to help you find or validate investment ideas.
The last section of the research tab that I’d like to show you is Economy & Strategy.

Specifically for investors who want to read up on specific sectors, there is the Morningstar U.S. sector reports. If we look further down the page we have the NBF Industry reports which provide commentary on the sector and stocks within the Canadian industry.

As you can see the NBDB research section offers many different types of research that can assist you in finding or validating investment ideas. Take the time to get to know this section of our platform.
Moving on, I have one last section to show you that can be found in the Markets heading and then Trading Central from the dropdown menu. On the secondary tab we have the Morning Brief which is a free daily news and trade ideas report on the US and Canadian markets curated by Trading Central. You can view it here or subscribe with your email and receive an email in the morning and find out what's happening before the markets open.
This concludes our video on the research section.

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8 steps to build a solid investment portfolio

Step #1: What kind of investor are you?