Jasmine Birtles
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How to Build an Investment Portfolio That Matches Your Risk Tolerance
Ruby Layram
24th Jul 2025
When it comes to investing, one of the biggest mistakes people make is building a portfolio that doesn’t match who their specific goals.
Maybe the advisor you follow on TikTok is super bullish. Maybe your mate at the pub swears by crypto. Maybe your cousin has just gone all-in on biotech ETFs.
But here’s the thing: it’s your money. Your goals. Your risk. And ultimately, your future.
So let’s make sure your investments reflect you, not someone else’s appetite for risk.
Here’s a step-by-step guide to building an investment portfolio that fits like a glove (and doesn’t give you heart palpitations every time the market dips).
Step 1: Work out your risk tolerance
Before you even think about choosing investments, you need to get honest about your own risk tolerance.
Ask yourself:
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How would I feel if my investments dropped 20% overnight?
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Do I prefer slow and steady growth or am I OK with big swings for potentially bigger gains?
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Am I investing for 1 year, 5 years, 20 years?
If the idea of a dip makes you sweat, you’re likely a conservative investor.
If you’re happy to ride out volatility for the chance of big wins, you’re more aggressive.
Somewhere in the middle? That’s a balanced investor.
There’s no right or wrong here, it’s about building something that you can sleep at night with.
Also see: What is an 80/20 portfolio and is it right for you?
Step 2: Set clear goals
Risk tolerance isn’t the only thing to consider. Your goals matter too.
Are you:
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Saving for a house in 5 years?
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Building retirement wealth over 25 years?
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Wanting a bit of passive income on the side?
Short-term goals usually call for safer investments. Long-term goals give you more room to take risks and recover from market dips.
Write your goals down, and give them a time horizon. This will shape everything that follows.
You might like: 8 different types of investment: which one matches your goals?
Step 3: Choose the right mix of assets
Once you’ve figured out your risk tolerance and goals, it’s time to choose your asset allocation, which is the mix of investments in your portfolio.
Here’s a simple breakdown:
| Risk Profile | Typical Portfolio Mix |
|---|---|
| Conservative | 70% bonds, 20% stocks, 10% cash |
| Balanced | 50% stocks, 40% bonds, 10% alternatives |
| Aggressive | 80% stocks, 15% bonds, 5% alternatives |
You can tweak this based on your preferences. For example, some people like adding in property funds or a bit of gold to hedge inflation.
Top tip: Use tools like Portfolio Visualiser to visualise what different mixes might look like.
Step 4: Pick investments that match your allocation
Once you’ve got your asset mix, it’s time to choose what to actually invest in.
For stocks:
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ETFs: Low-cost, diversified and perfect for passive investors. (e.g. S&P 500 ETF, FTSE All-World, Pro Shares Ultra Gold ETF).
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Individual shares: Great if you want more control, just make sure you diversify.
For Bonds:
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Bond ETFs: A great way to hold a range of government or corporate bonds.
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Gilts or Premium Bonds: For ultra-low risk and steady returns (though yields can be low).
For Alternatives:
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REITs: Property exposure without buying a house.
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Gold ETFs: A safe haven during times of uncertainty.
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Crypto: Only if you’re comfortable with serious volatility, and keep it under 5% of your total.
Step 5: Choose the right platform
You’ll need an investment platform to buy and manage your portfolio. Here are a few of our faves:
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eToro: User-friendly and offers copy trading (great for beginners).
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Trading212: Great for DIY investors who want control and low fees.
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Invest Engine: Ideal if you want to keep things simple with ready-made portfolios.
Compare fees and features. Even small charges can eat into your long-term returns!
Step 6: Automate and review
Once your portfolio’s set up, make life easier by automating your investments. Set up a monthly direct debit and let your portfolio grow over time.
But don’t forget to review it at least once a year.
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Has your risk tolerance changed?
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Are your investments performing as expected?
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Are you still on track with your goals?
If you need to rebalance (i.e., adjust your asset allocation), go for it. But don’t tinker every week, that’s how panic sets in!
Final thoughts
You don’t need to be Warren Buffett to build a solid portfolio. But you do need to build one that works for you, your goals, your risk tolerance, and your lifestyle.
The best investment strategy? One you can stick to for the long run.
So next time someone tells you where to put your money, smile politely… and stick to your plan.
Disclaimer: MoneyMagpie is not a licensed financial adviser. This article is for educational purposes only and should not be taken as financial advice. Always do your own research before investing. Your capital is at risk.
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