"Investment portfolio" with a building blocks icon

While the runways of New York Fashion Week may feel far away from Wall Street, the way you view your investments could be similar to how you think about your clothing. From trendy tops to staple sweaters, numerous pieces of clothing come together to make up your wardrobe — not unlike the way multiple different securities and assets create your investment portfolio. Let’s take a look at what exactly a portfolio is, and how you can discover which kinds of investments suit you and your portfolio style best.

What is an investment portfolio?

If pieces of clothing are like individual investments, then the entire contents of your wardrobe are your portfolio. An investment portfolio is simply a term that refers to your whole collection of assets, including stocks, bonds, cash, real estate, and more across all of your financial accounts.

Your portfolio isn’t a physical object — there’s no manila envelope or three-ring binder somewhere with your name on it. All your investments, including those in different accounts, make up your portfolio. For example, yours might include:

What goes in an investment portfolio?

Stocks and bonds are the t-shirt and jeans foundation for a portfolio. To bring your portfolio to life (and add a pop of diversification), you can accessorize it with other kinds of investments, from funds to Forex. Here are some of the popular asset types you might explore for your portfolio.


Stocks are an essential building block of investing. Companies issue shares of stock; investors buy and sell them. This gives you ownership of a percentage of the company and a share of its assets and earnings. When a stock’s share price goes higher than what you paid for it, and you sell your shares at the higher price, that’s money in your pocket. Some companies also pay dividends, basically cutting off a slice of the profit pie and handing it straight to shareholders.

Stocks can be risky, though: You will lose money if you sell after a stock’s price takes a nosedive.

If you’re a D.I.Y. investor, you can easily invest in thousands of stocks through our Self-Directed Trading Account. Just make sure you do your research before you start shopping.


As a fixed-income security, bonds bring stability to your portfolio by offering a predictable income stream.

Think of a bond as a loan you make to someone else — usually a corporation, a government agency, or a municipality. That entity gets to use your money for a set period of time and then pays that money back to you with interest.

You can invest in bonds in various ways:


Exchange-traded funds (ETFs) pool together the money of many investors to invest in a basket of securities that can include stocks, bonds, and other investment types.

ETFs are typically passively managed, meaning instead of having a portfolio manager select specific securities to buy and sell, ETFs attempt to replicate the performance of a specific index (like the S&P 500) or track an industry (like biotech) by investing in stocks from a range of companies within that sector. ETFs can be a smart way to increase your portfolio’s exposure to new industries and companies.

Like stocks, ETFs trade on an exchange, so their prices fluctuate throughout the day. These funds typically have low expense ratios or management fees, and at Ally Invest you can trade them commission-free.

Mutual Funds

If ETFs are the trendiest clothes in your closet, mutual funds are a more curated collection of items picked by a stylist. Mutual funds, like ETFs, are funds that pool together money from thousands of shareholders to buy large blocks of stocks, bonds, and other securities with a common investing strategy. The individual investments within a fund are typically researched and chosen by analysts and managed by an investing and finance professional.

Unlike ETFs, mutual funds are only traded once per day. And, because they are usually professionally managed, they can be more expensive than ETFs.

Real Estate

Real estate investing can include physical properties, like the home you live in or an apartment you rent out, or a real estate investment trust (REIT), which is a simple way to make this asset class a part of your portfolio without having to take out a mortgage or become a landlord.

Remember, whether you invest in real estate directly or indirectly, risks are involved. There’s never a guarantee you’ll make a return or even break even on your investment. However, real estate can be a smart way to diversify your portfolio, as it typically does not have a strong correlation with the equities markets.

What should you consider when building your portfolio?

There’s more to creating a portfolio than just investing in cool companies or hot new stocks. You have to think about how all your different investments help you build wealth while mitigating risk. These three factors can guide you:


This is a critical characteristic of a strong portfolio. A diversified portfolio is one that holds a variety of investments across different asset classes, industries, and geographies. Diversification helps limit risk because your investments aren’t all affected by the same market factors — if a percentage of your portfolio is negatively affected, other holdings may not be.

Risk Tolerance

Everyone has differing levels of risk they’re willing and able to take on, which can influence the balance of holdings within your portfolio. Some investors may have a greater risk appetite because they have more time to weather market ups and downs, while others may be unable to withstand losses due to a market downturn.

Time Horizon

How long you plan to keep your money in the market can have a major impact on the investments in your portfolio. Like a classic leather jacket, some investments stand the test of time and are great for holding long-term, while others may make more sense for short-term investors.

How to Start Building an Investment Portfolio

Now that you know all the basics that go into a portfolio, you can think about building yours. As a D.I.Y. investor, your investment goals and timeline can impact the risk you can take on — and the balance of securities that will help you maintain that risk level.

Pro tip: Not sure how to balance your assets? The Rule of 110 is a good place to start.

If you’d prefer to have more help building and managing your portfolio, you might enlist the assistance of a robo-advisor. Ally Invest’s Robo Portfolios utilize human expertise and technology to create an investment portfolio that reflects your goals.

What types of investment portfolios are there?

Different levels of risk tolerance, investment goals, and value can be reflected in the makeup of your portfolio. Here are a few common types you might consider:

Aggressive: If you have a lot of time to invest and a high-risk tolerance, you may opt for a portfolio made up of a greater percentage of stocks to bonds.

Moderate: A more even split of stocks and bonds, meaning growth may be slower, but the risk of loss is lower.

Conservative: If you have a short time horizon and can’t withstand potential losses, a conservative portfolio that’s heavily weighted with fixed-income securities is less susceptible to volatility.

Socially responsible: Your investments have the power to make a difference in businesses and the world. A socially-responsible portfolio is made up of securities from companies that reflect your values, such as diversity, the environment, and social justice.

The portfolio is a process.

Building a portfolio isn’t like a one-and-done investment shopping spree. It’s an ongoing process of learning, trying new things, and tailoring your investments to fit your needs and goals. Over time, the makeup of your portfolio will vary as the market fluctuates, your time horizon changes, and more. The most important factor is that you get started, whether on your own or with the help of a robo-advisor, because investing is always in style, and you don’t want to be fashionably late.

Create an investment portfolio that fits your style with Ally Invest Robo Portfolios.

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