How to Build the Ultimate Investment Portfolio Part 2

In light of writing the first edition of “How to build the Ultimate Portfolio” I thought about the details that we would have to think about when putting it into practice. Everything is life is easy to say or write about, but putting it into practice is a whole different dimension. That’s why so many get rich books sell so well while most people that read those books don’t get rich.
 

The get rich books often talk about the mindset or some things that need to be done to get rich, but every person is different and that’s why you the reader, has to take action and push yourself possibly outside of your comfort zone to learn and create a portfolio that suits you needs.
 
Not every portfolio is going to be the same and it really shouldn’t be. We all have different tastes, different risk tolerances, and different goals. That’s what makes each and every one of us unique and that’s also what makes each and every one of also interesting.
 
Think About Who YOU Are
That’s right, before you go out there buying stocks out of the blue, think about who you are. What kind of person are you? What kind of situations can you endure? Can you bear to watch the market fall 30%? Can you live off of 2% interest income? Do you have to invest in penny stocks? Putting all this together leads to understanding your risk tolerance.
 
What do you like?
We all have preferences in what we like, and this can be on a daily level but I’m talking more about stocks and industries for the purpose of this article. I have a preference towards financial stocks because of their stability. Yes, as I’ve said time and time again, the financial stocks have been hit very hard, but in reality you have to understand that some of these financial institutions have some very smart people working and a lot of them in reality are very stable when the dust settles.
 
Look at all the industries you might have a preference for Technology, Basic Materials, Utilities, or even Healthcare. Whatever it is, it’s ok to have some bias in your portfolio leaning towards that sector, and after all it is your portfolio.
 
Thinking about Dividends
For the purpose of the ultimate portfolio I am talking about here, the stocks have to have dividends. And this means you are looking for extremely stable companies that have a good chance of dividend growth going forward, not just a few years, but many many years down the road.

So in reality, you’ll probably be looking at the top 2 companies in each sector. You could potentially look a little further down the list depending on the sector but you have to pick stable companies.
 
Know What You’re Looking For
You don’t want to pick a company just because it’s market capitalization is big (number of outstanding shares x share price). You want to choose a stock because you believe in the company and you believe in the industry. Have criteria that you look for when choosing a stock, it could be anything from technical indicators to fundamental figures. You have to make sure you do your homework before you buy anything. If it were easy everyone would be doing it.
 
Choosing A Broker
Limiting the fees that you incur is integral in creating an ultimate portfolio. Although, you won’t be buying and selling like a mad trader, you still need to make it so that you can limit your fees to help grow your portfolio. Find a broker or online broker that can help you with this. Some online brokerage services give you good discounts if you invest over a certain amount such as $100,000 with them. Shop around and see what the best brokerage is for you. Some offer better research than others while some offer lower transaction fees, it’s really up to you what you’re looking for.

Tomorrow I’ll write about what goals to have and how you can chip away working at your portfolio number. Thanks for reading!