How I Build a Portfolio



Good Afternoon,

This week I had the privilege to speak at the We Are Stock Traders Round Table event. During the event, there was a question about how do you construct a portfolio and I thought that would be a good topic to share with everyone. Creating a portfolio is different for everyone because we all lead different lives. My approach works for me, and in the spirit of this blog, it would be a good starting point for most.

1. First I start off by looking at my income and judging how steady it is and what impacts me either earning more or less.

2, From there I define my goals and objectives for the portfolio. What is the purpose of that portfolio? What is the time horizon? What is your risk tolerance?

3. After defining those points, then I select the core allocations for my portfolio. This serves as the base of my portfolio and will dictate my return/risk profile.

4. Once the core allocations have been selected, then I add other investments based on my view/outlook for the businesses. I size my position based on my conviction within their business model and the stability of returns.

5. Finally, I review how the portfolio will look before investing

My process isn't as complex as most would believe, but it does take a lot of time defining the parameters from the beginning to ensure I meet my goals. The only thing constant is change, so I am evaluating my portfolio on a consistent basis along with revisiting my parameters to make sure everything stays in line. There are tons of different ways to build a portfolio, but I have found these steps work for me, so hopefully, you can benefit from them.

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