When investing in stocks there are a variety of techniques that should be employed to minimize your exposure to potentially volatile markets. Building an investment portfolio is a decision that can lead to long-term security for you and your loved ones, and there are numerous companies that offer professional advice on how and when you should invest. You understand how to grow a portfolio from scratch while minimizing your exposure to risk.

Decide What You Can Afford to Lose

While the share market represents a way for you to make significant profits, there is also a possibility of loss of your investment. Before committing to building an investment portfolio you should know how much money you can afford to lose. According to MSN Money, stock portfolios should be around one-10th of your net worth, including your home and your cash savings. By only risking a limited amount of your total wealth, you won't be at such a risk should the market sour. Stop investing once it is at a size you are comfortable with and consider spending money on other parts of your life, maybe start a college fund for your children.

Establish Basic Portfolio Rules

If you want to reduce the risk invest in a mutual fund, choosing low-risk, low-yield funds will allow you to safely grow your portfolio. Don't buy stock in companies that you were told about by a friend of friend, or in high risk developing industries. If you are saving for retirement, spend a set amount at a set interval. Fifty dollars every week turns into a considerable sum after 10 years. Keep to this rule and only increase the amount if you want to, when you can afford it. As with any type of investment, be sure to set guidelines about the type of company you would like to fund. If you do not agree with weapons manufacture, you should steer clear of specific companies, or mutual funds that own shares in these companies. Due diligence in your research of companies is essential to understand which companies are right for you, as well as assessing the types of returns they have provided over the course of the year.

Exit Strategy

If your reason for investing is to build up a nest egg, you need to make sure that you will be able to liquidate your stocks if you require the money. Exiting a market should not be done all at once, unless you are supremely confident that it at its high. As with portfolio growth, by selling down a set dollar amount every month you can wind down a portfolio with less risk.

Keep Eye on Money

It is in your interest to make sure that your investment is protected. The global financial crisis in 2008 was caused by a significant lack of oversight, from the individual investor right through to the U.S. Treasury. If you have bought shares in a mutual fund, make sure you check on its performance and if it is underperforming, consider changing funds. If you have chosen to invest directly in companies, make sure you check over their annual reports for performance statistics. A diverse portfolio of shares can provide long-term security and will grow in value with careful management. Do your research before investing to keep your money safe.

Source:

Credit Guard: The Beginner's Guide to Investing

Tomorrow's Money: Stocks

NSN Money Central: A Beginner's Guide to Investing

Resource:

Investopedia: Dollar-Cost Averaging

AARP Financial: How Much Should I Invest?