How to Build the Ultimate Investment Portfolio

You hear so much about diversification and I cannot stress enough how important it is. By diversifying your portfolio you give yourself a chance to survive in tough times, like we are going through now, and a chance to thrive in bull markets. Creating a diversified portfolio is just one step of many and in this article I want to take a diversified portfolio one step further and help you create the ultimate investment portfolio.

Dividends and Financial Freedom
I am a firm believer in dividends. In Canada, we are given a dividend tax credit that makes owning stocks of Canadian dividend paying stocks that much sweeter. Similar tax benefits may exist in other countries and for this you must ask you accountant or a tax expert.

By owning stocks of stable companies that pay dividends you are giving yourself a very good cash flow that you can rely on for a long time. But you don’t want to concentrate your stocks in any one industry such as financials and I’m sure many of us know this from how badly bank stocks were hit in the past year.

You want to have stable dividend-paying stocks in each industry and you want to continuously add to this with the dollar-cost-averaging strategy. Over time your cost base of stocks will look very attractive relative to the market and you might be able to realize a decent profit. Even in a horrible downtrend that we are going through, your portfolio will be doing relatively better.

Creating the Ultimate Investment Portfolio
Ideally you want to have income on a monthly basis and when you are doing your research you will see that every stock has dividends paying on different months. You can then choose your stocks on their quality first and then divide them on every month of the year. In times like we are going through now, you can start creating a portfolio relatively cheap especially if you are thinking longer term.

Setup a plan to add to your portfolio on a regular basis, this could be weekly, bi-weekly or monthly. Tell yourself that you will contribute a set amount or percentage of your income into your portfolio. You have to be disciplined to create your ultimate investment portfolio. Come back tomorrow for more details on creating the actually portfolio!