How to Build the Ultimate Investment Portfolio Part 3

Know How Much You Need A Work Towards That Goal
I have previously written about your portfolio number. This is the number that you need to achieve financial freedom and have passive income to the point that you don’t need to worry about anything as long as you control your expenses.
 

If you haven’t already, read my portfolio number article and think about how much you need (and not want) to survive off of a portfolio whether it be from interest or dividends. You should consider tax too, as every government takes a portion of your gains.
 
When you come up with a portfolio number, don’t be discouraged. The number is most likely are staggering number and that’s understandable. You need to understand that you are not going to achieve this overnight. It might not even in a few years, but through dedication and discipline, you will achieve your goal. At the very least, you will be much better off than those that do not even think about passive income or their portfolio number.
 
How Do You Save For Such a Large Number?
The reality is, it’s not all about saving. Of course, you need to put away a certain amount every month, but you also need to consider how your stocks will pay dividends and how your stocks and other portions of your portfolio (whether it be bonds or GICs) will pay interest. In addition, your equity (stock) exposure in your portfolio will grow over time and will help you reach your portfolio number.
 
Don’t Spend Your Dividends!
When you get dividends, you’ll be tempted to spend it but don’t. Leave your investments and investment income alone and reinvest everything until you reach your portfolio. The more you invest and reinvest, the quicker you will be able to achieve your goals. Give your portfolio a chance to grow.

Diversify Your Purchases
As I have written about the past two days in part 1 and part 2 about building the ultimate investment portfolio, you will need to buy stocks that pay dividends on every month of the year. You can overbuy something that you really like but don’t over do it. You can purchase maybe an extra 10% in comparison to everything else you have in your portfolio.
 
You want to split up your purchases so that you have growth in all aspects of your portfolio and if there is a downturn hopefully one industry will offset another or one part of your portfolio will ease the pain of the falling markets. You obviously need to invest or put away money on a regular basis, to take this one step further, have a schedule as to when you will buy what stock. Don’t worry about the price of the stocks just worry about the quality of the stocks. You need to dollar-cost-average your stocks. Make sure you read my Dollar-Cost-Averaging article if you haven’t already.
 
Don’t Panic! Patience is a virtue
Markets will fall, there will be days where it looks like all hell has broken loose. But don’t worry history repeats itself and as long as you have bought quality stocks then you will be ok. However, pay attention to what happens to each company, things can change and just because a company is the most stable in the world right now, doesn’t mean they will be the same 5 years from now. Always review what you have in your portfolio.
 
Readjust Your Portfolio
When a certain stock takes off or something happens such as a takeover that makes one stock put your portfolio out of balance, consider selling a portfolio of that stock and buying something else to offset the difference. This way you can mitigate your risk of having too much in something while realizing some gains and putting you one step closer to your portfolio number.
 
Mo2 Thinks
Despite having written about this over 3 days, there is much more to building the Ultimate Investment Portfolio. The more you know about investing the better and I suggest that if you’re serious about building such a portfolio you start watching business news and do research on your own about stocks and the economy. However, don’t let the media drive you crazy. What they often talk about on channels like CNBC can be inflated and isn’t necessarily going to be helping you make decisions. Always take things with a grain of salt. There are many things that CNBC can help you with such as giving you exposure to a lot of investments and their valuations.
 
You can do a lot of research through your discount online broker. Every discount online brokerage nowadays has plenty of research information and this is a great way for all of us to learn more about investing. For example, if you’re looking for a certain stock that pays dividends that are yielding over 7% most online brokerage firms should allow you to do that online. Play around.
 
Always think longer term. Not even the greatest professional fund managers can predict what is going to happen in the market. Even if they time it right, most of it is luck while some of it is experience. If you have a longer-term mindset you can succeed and I hope that this article has helped you change or strengthen the belief that an investment portfolio that will make you financially free is indeed possible for everyone.