How to build the ideal investment portfolio – and why it must not lack real estate

Every successful investor has one thing in common: a well-thought-out investment portfolio. What exactly is it, why do you need it, how do you put one together for your needs – and why should it not lack real estate? In this article we will shed light on it step by step. We will show you specific examples, practical tips, and also the mistakes you should definitely avoid when building a portfolio.

The definition of an investment portfolio, simply put

Imagine that an investment portfolio is your carefully assembled shopping basket of various assets. The ones that you as an investor own and that you have chosen on the basis of your financial goals, risk tolerance and time horizon.

The main purpose of putting a portfolio together is diversification – that is, spreading investments across various types of assets and sectors in order to reduce the risk of significant losses (Sarmas et al., 2020).

A portfolio can be made up of practically anything that has the potential to appreciate over time. This includes:

• stocks and ETF funds,
• bonds,
• investment properties,
• precious metals such as gold or silver,
• cryptocurrencies,
• and even, for instance, art or collectibles.

A one-off investment vs. a portfolio

When you invest once into a single asset – for example, into the stock of one company – you certainly do have a chance at a profit. At the same time, however, you take on the entire risk.

By contrast, a well-diversified investment portfolio contains several kinds of assets. Thanks to this, it eliminates the fluctuations that can appear with a single investment.

Active or passive portfolio management?

• Active management = you constantly adjust the composition of your portfolio according to the situation on the market.
• Passive management = you set up your portfolio according to your investment strategy and let it work over the long term.

An investment portfolio can be both. What is important is to choose an approach that matches your goals and the time you want to devote to investing.

Investment portfolio: An example, or What does it look like in practice?

There is no single universal investment portfolio that would suit everyone. A lot depends on what kind of investor you are – that is, what your investment profile is and how you stand towards risk. One person mainly wants to preserve value and reduce the fluctuation of their investments to a minimum, while another longs for maximum growth, even if it means higher volatility.

But let's take a look at a model scenario: Imagine an investor who has CZK 500,000 and a 10-year horizon. They want to invest sensibly and with spread risk, that is, not to put everything on one card.

An example of a balanced portfolio:

• 40% (CZK 200,000) – ETF funds (stocks of various companies all over the world, growth potential)
• 25% (CZK 125,000) – bonds (stability and regular interest)
• 20% (CZK 100,000) – real estate in the form of crowdowning via InvestBay (stable income from rents as well as future appreciation)
• 10% (CZK 50,000) – gold (protection against inflation, a safe haven in turbulent times)
• 5% (CZK 25,000) – cryptocurrencies (a dynamic component with higher risk as well as growth potential)

This investor chose the real estate component via InvestBay, because it offers a combination of a low entry point (you can start from as little as CZK 2,500), simple management without worries, and at the same time the option to take part in direct rental income as well as in the growth of the property's value upon sale.

If, however, it were an investor with a more conservative profile, they could put a larger part into bonds and real estate instead of 40% in ETFs.

Conversely, a dynamic investor with an appetite for risk could instead strengthen the equity component and cryptocurrencies more. You can see that a portfolio always adapts to you – not the other way around.

Why diversify and not put everything on one card

Diversification means spreading investments into various asset classes. The reason? When one asset is losing, another can be growing. It helps you cope with market fluctuations and not panic at every decline (Pal, 2022).

The magic triangle: return – risk – liquidity

Every investment moves within these three parameters. The ideal investment portfolio seeks a balance among them:

• Return: How much the investment grows the money.
• Risk: How great the risk of loss is.
• Liquidity: How quickly the investment can be turned back into cash.

For example, real estate has a high return, lower risk, but lower liquidity. That is precisely why it is important to also have more liquid assets in your portfolio, such as ETFs or a financial reserve (cash).

Tip: Read about the magic triangle of investing in our article.

What the ideal investment portfolio looks like

It is important to say that there is no single universal portfolio for everyone. One person bets on stocks, another on real estate, and yet another perhaps on ETF funds or gold. It is precisely the variety that is important. Let's take a look, however, at examples of investment portfolios in various cases.

A possible portfolio for a conservative investor

For investors who prefer safety.

Allocation:

• 60% bonds
• 20% real estate
• 15% ETFs
• 5% cash

An example of a balanced portfolio

For those who want to combine stability and growth.

Allocation:

• 40% ETFs
• 30% bonds
• 20% real estate
• 10% other (gold, cryptocurrencies)

An example of a dynamic and growth strategy

For investors with a long horizon and a higher tolerance for risk.

Allocation:

• 60% ETFs
• 20% real estate
• 10% cryptocurrencies
• 10% other

Every portfolio should contain at least a small component of real estate – for stability and protection against inflation (Gallant, 2024).

How to create an investment portfolio for a child

When you invest for a child, you have a huge trump card up your sleeve – time. The money you start setting aside today can, thanks to the long horizon, appreciate many times over. This allows you to build the portfolio a little more boldly, with a higher proportion of growth assets.

A typical child's portfolio can thus look, for example, like this:

• the larger part is made up of ETF funds, which offer long-term growth potential,
• supplemented by a more stable component in the form of real estate through crowdowning with InvestBay,
• and a smaller part can go towards more conservative instruments, perhaps savings products.

Thanks to this, you combine growth, stability and a certain reserve.

Reading tip: Crowdfunding vs. co-ownership of real estate

And you can really start with very little.

An added advantage is that family can often send small amounts to a child's investment account – for example, money from grandparents for a birthday. Up to a certain limit it is possible to send funds this way from various accounts, with the rest then always flowing from the parent's authorised account.

Investments for children can thus function not only as a financial reserve, but also as a beautiful way for a family to build the future of its youngest members together.

Real estate as the cornerstone of an investment portfolio

Why does real estate belong in every portfolio?

• Stability – real estate is not as subject to fluctuations as, for example, stocks.
• Tangibility – you invest in a real asset.
• Protection against inflation – property prices rise along with inflation.
• A double return – regular income from rent and profit upon sale.

Real estate even with little capital? Try crowdowning

Crowdowning means that you own a piece of a property together with other investors. You enjoy the returns, and we take care of the worries.

Why it makes sense:

• you start from as little as CZK 2,500 – you do not need any large capital
• no tenants, no maintenance – we handle everything for you
• you have a return from two sources at once: rent + appreciation upon sale (read How InvestBay pays out money)
• real estate investments are handled by experts; you just follow the results
• as an investor you can go on holiday to our properties at a discount
• we vet every project in detail – you get clear figures, analyses and also risks
• simple and quick account verification, Czech support always at hand
• you invest in various properties and locations – from Lipno to Spain – and thereby spread the risk

At InvestBay we select properties with the potential for growth and rental income. You just choose the project you want to invest in.

Take a look at the current investment offer

How to measure the performance of an investment portfolio

You most often measure performance using ROI – return on investment.

The formula:

ROI = (Net profit / Initial investment) * 100

Thanks to InvestBay's investment calculator, you can easily calculate ROI. Also keep track of the development of the individual components of your portfolio and do an investment review 1–2 times a year.

The 4 most common mistakes when building an investment portfolio

1. You put everything on one card (e.g. only stocks)
2. You ignore risk: high returns = higher risk
3. You are excessively active: frequent trading often reduces the return because of fees
4. You decide emotionally: panic during declines or FOMO during growth

Practical tips on how to build your portfolio smartly

To begin with, it must be said that no template for this exists and everything needs to be adapted to your needs.

The first step? Start from your goal. Think about what you actually expect from your investment portfolio. Do you want certainty and stable returns, or are you rather looking for growth and willing to accept greater fluctuation in the value of your investments? The answer to this question will help you choose the right investment strategy and asset allocation.

Another important point is your relationship to risk. Each of us has a different level of "peace of mind" when it comes to money. One person breaks into a sweat right away when an investment drops by a few percent, while another takes it as a normal part of the game. Be honest with yourself – investing is not about what others are doing, but about what suits you.

Also consider your time horizon. The longer your investment horizon, the more you can afford to take risks. If you are investing for 10–15 years, short-term fluctuations need not trouble you. Conversely, if you are going to need the money in two years, caution and the choice of more conservative instruments are in order.

Invest regularly. Even small amounts that you set aside every month can make an enormous difference over the long term. You do not have to wait until you have a hundred thousand in your account. More important than the amount is precisely regularity – and the habit you build through it.

And perhaps the most important piece of advice in conclusion: do not be afraid to start with little. At InvestBay you can invest from as little as CZK 2,500. Do not wait for "once I have more money". Start today, with what you have – and watch how your investment portfolio grows along with you.

Start building your investment portfolio with InvestBay

You choose from an offer of profitable properties that we manage for you – and you invest. Investing has never been simpler – online, clearly, without worries and, if you like, even with low starting capital.

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You often ask

What is an investment portfolio?

An investment portfolio is a set of various investments that you hold – e.g. stocks, funds, real estate. Its aim is to grow money and spread risk.

What are portfolio investments?

These are investments that are part of a portfolio. You do not bet on one card, but combine several types of assets, e.g. stocks and real estate.

What must a portfolio contain?

Ideally various asset classes – stocks, real estate, bonds, a cash reserve. The key is diversification, that is, spreading risk.

Sources used

• Gallant, C. (2024, November 10). 4 steps to building a profitable portfolio. Investopedia. https://www.investopedia.com/financial-advisor/steps-building-profitable-portfolio/
• Pal, B. (2022). Portfolio Management Strategies. International Journal for Research in Applied Science and Engineering Technology. https://doi.org/10.22214/ijraset.2022.44929
• Sarmas, E., Xidonas, P., & Doukas, H. (2020). Introduction. Springer Optimization and Its Applications. https://doi.org/10.1007/978-3-030-53743-2_1