Building a long-term portfolio involves more than just picking a few stocks, bonds or mutual funds .

Considerations such as a client’s personal goals, risk tolerance and capital preservation should top a financial adviser’s list when building the client’s portfolio. Not all asset classes or investment vehicles are suitable and for good reason.

The problem for retirees or potential retirees is that the yields on bond portfolios are very low relative to historical standards, said Ed Keon, managing director and portfolio manager at Quantitative Management Associates, an asset management business of Prudential Financial.

That means that you need to add some assets which you hope have higher expected returns, but that means you probably need to take some additional risk, he said. Examples: stocks, specialized mutual funds and alternative investments .

When structuring a portfolio with the view of providing income during retirement. a financial adviser will look at the client’s current financial situation, liquidity requirements and risk profile.

Investing for the long term allows individuals to not worry so much about short-term liquidity or volatility, said Michael Luftman, a MetLife Premier Client Group financial adviser. They can use short-term pullbacks as buying opportunities if they understand the risk and their ‘real’ time horizon.

Factor In Lifestyle

Other elements that matter are current employment, spousal income and other assets. For the time horizon, age matters less than the client’s lifestyle, Luftman notes.

From a suitability perspective, you could have a wealthy client at 90 years old who has enough money to live on from her pensions and other income, and so she may choose to have a 100% stock portfolio, Luftman states as an example.

Someone who is only 30 may have a more conservative stance depending on his or her specific situation. That’s why it’s important to ask: How long until you will need the money, and how long is this money going to last?

Key to any long-term mutual fund investment strategy is diversification. Since often the goal of a long-term strategy is to preserve the standard of living and provide additional income, investments such as annuities, target-date or strategic income funds and nonpublicly traded real estate investment trusts (REITs) may be good additions to one’s portfolio.

Diversification is the only free lunch, said Keon. You want to hold a lot of different asset classes with the idea that no matter what happens in the world, you’d like to be able to preserve your standard of living.