How to Build an Investment Portfolio, From Scratch
Before optimizing weights or looking at risk metrics, you need to decide what portfolio you're building. This guide covers the steps that come first: goal, asset universe, real diversification and risk tolerance. Once that's clear, the next step is optimizing the weights — or you can try it now, no signup.
1 · Define your goal and time horizon
Saving for something 2 years out is not the same as investing surplus cash you won't touch for 15 years. Your time horizon determines how much volatility you can afford: the longer the horizon, the more room to absorb temporary drawdowns in exchange for higher expected return. Start by defining the goal (retirement, a target amount, growing savings) and the timeframe — every other decision follows from there.
2 · Pick your asset universe
OjoAlTicker covers four universes with real data and history: the S&P 500 (US large caps, the most sector-diversified), the Nasdaq 100 (more tech-heavy), the IBEX 35 (the Spanish market) and a curated set of ETFs. You don't have to pick just one — you can combine assets from several universes in the same portfolio.
3 · Diversify for real, not just "several assets"
Holding 10 stocks doesn't diversify anything if all 10 move together. What matters is the correlation between them: two low- or negatively-correlated assets offset each other when one drops, while two highly correlated ones (say, two banks in the same market) add little to each other. The diversification guide explains how many assets you need and how to check real correlation between them.
4 · Decide how much risk you can take
Before optimizing, get a sense of what "too much risk" means for you. Two metrics help quantify it: volatility (how much the portfolio swings) and max drawdown (the largest drop it would have suffered from a peak). A portfolio with a good average return but 40% drawdowns can be unbearable if you need the money at the wrong time.
5 · Don't eyeball the weights — optimize them
Picking "a bit of each asset" by eye is almost never optimal. The optimizer searches, among thousands of weight combinations generated via Monte Carlo simulation, for the one that maximizes the Sharpe ratio or the Sortino ratio, or the one that minimizes tail risk as measured by CVaR — using the Markowitz efficient frontier as the reference framework.
6 · Test it before committing capital
You can see this whole process in action without creating an account: the portfolio simulator generates a real 4-asset combination from one of these indices, with its efficient frontier, correlation and risk metrics. When you're ready to work with your own assets (up to 15 on the Pro plan) and real capital, sign up for free.