How to build an investment portfolio
How to combine stocks, ETFs, bonds and other assets into a structure that fits your goals and your risk tolerance.
The basic principles of investing
Before any structure or calculation, it's worth starting from a few simple ideas. These are the principles that investors with consistent results have applied for decades — and that you can follow too, without being an expert.
Long horizon
Money you invest needs to be able to sit for many years. In the short term the market goes up and down; over the long term, history shows it tends to rise.
Diversification
You don't put everything in one place. Usually that means at least 10–15 different assets, so a single isolated failure doesn't bring down the whole portfolio.
Solid companies
Preferably large, stable companies (blue chips), less exposed to bankruptcy than small, volatile firms.
Low costs
Fees eat into your return. Cheap instruments, such as index ETFs, keep more money in your account.
These are the principles championed by leading investors such as John Bogle (creator of index funds) and they align with what the CFA program teaches: diversification, low costs, discipline and patience. They are general principles, not guarantees — none of them eliminates risk, they only make it easier to manage.
The clearest example: the S&P 500 index
The S&P 500 index is made up of the 500 largest companies in the US. Viewed as a portfolio, it satisfies all four principles on its own: the companies are large and solid, there are 500 of them (so it's highly diversified), it can be bought through a single cheap ETF, and its history spans almost a century. That's why we use it as an example throughout this page.
Real chart, using monthly values from 1928–2026 (logarithmic scale, on which steady growth appears as a straight line). The line tracks the index's price, which grew ~6% a year; with dividends reinvested, the total return was ~10% a year. We've only marked the largest visible swings in history here — between them there are also smaller declines, of 20% or more, known as bear markets, which are more frequent and followed mainly by active investors. Data source: S&P 500 historical series.
The pattern is clear: declines are shorter and shallower than gains are long and broad. A bear market shows up on average once every ~3.5 years, but every decline in history has eventually been followed by a recovery to new highs. Over ~100 years, the index has produced on average about 10% a year (nominal, with dividends reinvested).
That's where the first rule comes from — the money needs to be "long-term": even in the worst-case scenario — if you had bought right before a crash — history shows that within a few years you would have been back in positive territory. What's more, over any 20-year period in the index's history, the final result has been positive. And if you had bought after a decline rather than before it, the return would have been even better.
The figures above are the average of the 500 companies. If you don't diversify and hold only a handful of stocks, the swings are much larger — both up and down (you can test this in the calculator below). And because the index holds the 500 largest firms, the S&P 500 example shows how the three ideas — time, diversification, solid companies — combine to produce a result that has weathered every crisis. Diversification doesn't necessarily require 500 companies; you can pick the ones that suit you best.
Important: the last ~15 years show different figures from the century-long average — economies move faster, growth periods have been longer, and recoveries faster (in 2020, after a one-month drop, the index recovered within a few months). Over the last ~50 years the average has been higher, around 11–12% a year. In the harshest episodes — the Great Depression — the index lost more than 80% and needed years to recover; real-estate prices fell then too, incidentally, one more reason not to invest money you need in the short term.
Indicative figures, averaged over long periods (sources: Ned Davis Research / Hartford Funds, Morningstar, Dimensional; exact sources will be listed at publication). Past performance does not guarantee future results.
What an investment portfolio is
A portfolio is the sum of all the assets you hold at a given time: stocks, ETFs, bonds, possibly gold or cash. Many investors spend hours looking for the "perfect stock," but over the long term what matters more is how you split your money between different types of assets. This split is called allocation.
The difference between holding a few random assets and having a portfolio is intent: each component has a role, and the proportions are chosen, not stumbled upon. This page doesn't repeat what a stock or an ETF is — you'll find that in the What investing is guide. We start from the next step: how you combine assets into a balanced structure and how you maintain it over time.
Having an investment portfolio is a common practice around the world, not an exception. In the United States, about 62% of adults owned stocks in 2025, directly or through funds and retirement accounts (source: Gallup, 2025). For most people, investing is part of normal financial life.
Diversification: the different ways to do it
Diversification means not depending on a single thing. Most people think only of "more stocks," but risk can be spread across several axes at the same time:
Asset classes
Stocks, ETFs, bonds, gold and commodities, cash. Each reacts differently to the same events.
Sectors and industries
The 11 sectors in the US (technology, health care, energy, finance, etc.). When one struggles, another can offset it.
Countries and economies
Companies from different economies, so you don't depend on a single country or a single economic cycle.
Listing currency
Some companies are listed on multiple exchanges and can be bought in different currencies, which also splits currency risk.
Type of company
Large, stable companies (blue chips) or small firms, with higher growth potential but also higher volatility.
Entry timing
By investing regularly instead of putting in a single large amount, you buy in at different prices and reduce the bad luck of buying "at the top." You avoid this risk best by also learning a bit of market analysis — see below.
Diversification doesn't mean "as many assets as possible." Beyond a certain point, you add complexity without actually reducing real risk. What matters is that the assets are genuinely different, not just numerous.
To choose the timing and the companies better, you need at least a basic knowledge of analysis: on the fundamental side, see the How to choose a company guide; on the technical side, the investing courses can help.
Asset classes and their role
Each class behaves differently. You combine them to strike a balance between growth and stability.
| Class | Role in the portfolio | Risk | Liquidity |
|---|---|---|---|
| Stocks / stock ETFs | Long-term growth | High | High |
| Bonds / bond ETFs | Stability and interest income | Low–medium | High |
| Gold / commodities | Protection during inflation or a crisis | Medium | High |
| Cash / equivalents | Safety reserve, money on hand | Very low | Immediate |
Note: an ETF (exchange-traded fund) is a "basket" of assets bought through a single position — for example, an S&P 500 ETF gives you, in one purchase, exposure to 500 companies.
What performs better in a rise and what in a decline
Asset classes don't behave the same way in every phase of the market. In growth periods, stocks usually drive the result. In periods of decline or uncertainty, bonds, gold and cash tend to hold up better and cushion the fall. That's precisely why a balanced portfolio combines them — and why, when the market phase shifts, some investors move part of their weighting from stocks toward the defensive classes, or the other way around.
The key is recognizing when the market phase changes — and that takes analytical knowledge, not intuition. It's exactly what you learn in the investing courses.
Holding cash is also an investment decision, especially through the currency you choose. If you hold money or buy assets in euros, but the dollar rises, say, 10% against the euro in a year, the net result of your portfolio changes significantly — for better or worse. Choosing the currency you invest in again requires at least a basic knowledge of market analysis.
Cash equivalents are very safe instruments that are easy to turn into cash: savings accounts, short-term deposits, money-market funds and short-term government securities (treasury bills).
Risk and your profile
On the capital market, the value of your investment rises or falls by exactly the percentage the asset has moved since you bought it. A decline on paper is not a real loss — it only becomes a loss if you sell at that point. You truly, permanently lose it only if you sell at a loss or if the company behind the stock goes bankrupt.
This is where you can see why the rules matter: you lose a position when the company goes bankrupt, and you'd only lose the whole portfolio if all the companies you hold went bankrupt at the same time. The more solid, different companies you hold, the more that chance becomes practically negligible. That's why diversification and large companies are basic principles.
There is, however, one risk that diversification doesn't eliminate: market risk, when almost everything falls at once — a recession, a crisis. You can't avoid this one, but you can make it easier to bear through an allocation suited to your profile. The starting point is your tolerance for declines and your time horizon.
A broker going bankrupt is a different thing from a company in your portfolio going bankrupt. Your stocks aren't actually held "at the broker": they're registered in your name at a central depositary, and the broker is just the intermediary through which you buy and manage them. If the broker goes bankrupt, the stocks stay at the depositary, right where they were, and you can still view and manage them through another broker. At a regulated broker, client money and assets are held separately from the firm's own money (segregated), so they can't be used to pay off the broker's debts. In addition, there are investor compensation schemes: in the European Union, up to €20,000 per client, and in the United States (SIPC) up to $500,000. That's why it matters to choose a regulated broker.
Conservative
Short horizon or low tolerance for declines.
Moderate
Growth and stability, medium horizon.
Dynamic
Long horizon, higher tolerance for fluctuations.
The percentages are examples, not recommendations. Your actual profile depends on your goals, horizon and situation. Order:stocksbondsgoldcash
Well-known portfolio models
Over time, investors and researchers have proposed ready-made allocation structures, tested over long periods. None of them are mandatory and none is the "best" one for everyone — they're starting points you can adapt. Below, for each one, you'll see its composition, who it suits, a limitation and a historical average return.
The returns below are expressed as an average per year (annualized), over long periods of time — not for a single month or "a whole lifetime," but the annual average the structure has historically produced.
60/40
The best-known structure. For those who want one simple rule that's easy to follow. Limitation: in 2022 stocks and bonds fell together, which rarely happens.
All-Weather · Ray Dalio
Designed to hold up across multiple economic scenarios, with smaller declines. Limitation: in strongly rising markets it earns less than a stock-focused structure.
Three-Fund
Three ETFs cover almost the entire market, at low cost. You choose the weightings yourself — the example here (40/20/40) is just one of the common variants; the return depends on it too.
Stocks only (blue chips)
A portfolio made up only of large-company stocks has historically produced more than mixed structures. The index of the largest American stocks has made, over ~100 years, an average of about 10% a year (nominal, with dividends), and over the last ~50 years more, around 11–12%. An inspired selection can beat these figures. In exchange, the declines are deeper, and the chance of consistently beating the index is small (see the "Why it's hard to beat the index" chapter).
If you want to see what a well-known investor's portfolio looks like, you can publicly follow the holdings of Warren Buffett's company: Berkshire Hathaway files a quarterly 13F form with the US securities regulator (SEC), and anyone can view it for free on SEC EDGAR.
Portfolio calculator
Choose a structure or adjust the weightings yourself and see a projection over time. The returns below are editable assumptions, not predictions.
Illustrative projection, based on assumed, constant returns. This is not a prediction and doesn't account for inflation or taxes. Actual returns vary from year to year and can be negative.
Why it's hard to beat the index
An index like the S&P 500 has 500 companies, but they don't contribute equally. A few pull the index strongly upward, many perform roughly around the average, and others fall well behind. (And the list of 500 isn't fixed: weak companies drop out of the index, and growing ones enter it — so the index "renews" itself over time.)
A broad study of the entire US market — not just the 500, but all of the more than 25,000 listed companies from 1926 to today — showed something surprising. Imagine that, instead of investing, you had kept your money in an ultra-safe placement (government treasury bills). Well, only about 4% of all stocks produced, above and beyond that safe placement, the entire net gain of the market. The remaining ~96%, taken together, barely matched that safe return. What's more, nearly 57% of stocks delivered, over their entire lifetime, less than the safe placement.
Two conclusions follow from this. First, that's why you diversify: by holding many companies, you increase the chance that the winners pulling everything upward are among them. Second, that's why it's hard to beat the market: if you pick only a few stocks, you have to land on exactly the handful that make the difference. If you manage to identify the future winners early, you can outperform the index — something many people want but few achieve consistently, and always at higher risk.
Source: Hendrik Bessembinder, "Do Stocks Outperform Treasury Bills?" (2018). To be listed at publication.
Rebalancing
Over time, assets grow at different rates. If stocks rise a lot, their weighting increases and the portfolio becomes riskier than you originally set it to be. Rebalancing means bringing the proportions back to target: trimming what has grown too much and adding to what has fallen behind. It's done periodically — for example once or twice a year — or whenever a weighting drifts far from its target. It isn't an attempt to "time" the market, but a discipline that keeps your portfolio on the profile you chose.
How to apply this, step by step
Set your profile and horizon
How long you can leave the money invested and how much of a decline you can tolerate.
Choose an allocation structure
Start from one of the model structures or from your risk profile.
Choose the instruments
Usually low-cost ETFs that cover each class or sector.
Open an account with an investment broker
Compare your options on the Investment brokers page.
Invest regularly and rebalance
Steady contributions and a periodic check of the weightings.
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Book a consultationTaxation in brief
In Moldova, gains from selling assets are taxed as capital-gains income: the taxable base is 50% of the gain, at a 12% rate — which works out to an effective rate of 6%. Dividends and interest have their own rules. All the details, with deadlines and forms, are in the Are stock market profits taxed? guide.
Frequently asked questions
Once or twice a year is enough for most structures, or whenever a weighting drifts significantly from its target. Rebalancing too often raises costs without a clear benefit.
There's no fixed amount. With ETFs and modern brokers you can start with small amounts and add to them regularly. The right amount depends on your situation and goals.
None of them is "the best" for everyone. Each balances growth and stability differently. The choice depends on your horizon and how much of a decline you can tolerate.
ETFs offer instant diversification and low costs, which is why they're used often in model structures. Individual stocks require more time and analysis and concentrate risk, but if chosen well, they can bring a higher return than the market average.
Build your structure, then put it into practice
Try different allocations in the calculator, choose a structure that fits your profile, and open an account to invest in real assets.
Risk notice: This material is for educational and informational purposes only and does not constitute personalized investment advice. Investing in financial instruments carries the risk of losing capital. Past or assumed performance does not guarantee future results. Investment decisions should be based on your own situation and, where appropriate, made in consultation with a specialist.