Designing your Own PortfolioMay 3, 20131My own Investment Portfolio: You wish to configure your Investible Securities for optimumgrowth.I should first assess the economic conditions. If they are favourable, then i look at thecapital market expections. Afterwards, i can select the optimal instruments.I wish to match the available “optimal” instruments with my personal GOALS ANDOBJECTIVES. After i determine my own goals and objectives, i can design & build theportfolio. The portfolio will have an “asset allocation” table ... that will guide “which money”goes to “which instrument.”To arrive at the Asset Allocation, i need to check1. What are my medium-term goals, long-term goals2. Whether i can take on risky assets.
Designing your Own PortfolioMay 3, 20132GOALS & ObjectivesGOALS: to achieve growth & income, in my stock portfolio, and bond portfolioObjectives: to achieve growth in the stock portfolio by long-term investing, infundamentally-sound stocks. I also would need a few stocks that pay good cashdividends.Objectives: to achieve growth in the bond portfolio by letting a fund managertrade the bonds.CONSTRAINTS:Risk Tolerance: what instruments may, or may not, be usedTime Horizon (what segments can be invested for one year vs ten years)Liquidity Needs: do i need the portfolio to generate interest, or cash div, for myeveryday expenses? If not, the portfolio can be focused on capitalgains—buy stocks that do not really give high cash div, but which havegreat potential with regard to earnings & price gains.Tax concerns: (any chances of tax savings...)Legal & regulatory issues, if anyUnique needs and preferences, if any3. My investment portfolio is the best combination of assets that will deliver good growthover many year(s). Steps:a. read the Economic conditionsb. check the Capital Market outlook, expected returns on stocks or bond fundsc. What instruments will do well, given this point in the economic cycle4. Among the recommended instruments or investment vehicles, which ones are availablenow, easy to access, and not overpriced? Let me get a good mix.Survey of Available InstrumentsExpectedReturnVolatility: plus orminus __%High-Dividend Stocks 8% 2%High-Growth Stocks 30% 40%Stocks with Steady & Stable Growth 15% 5%Bonds, activily traded. 12% 3%Bonds, high-yield 7% 2%per year
Designing your Own PortfolioMay 3, 201335- a. Asset Allocation –adjust the percent to personal taste.Sample ... Asset Allocation PercentHigh-Dividend Stocks 20High-Growth Stocks 20Stocks with Steady & Stable Growth 20Bonds, actively traded. 20Bonds, high-yield 20example5-b. Allocate investments to the winning industries.Industry or Sector ...Allocation PercentReal Estate 20Energy 30Food 20Mining 15Others 15APPENDIXNotes on economic outlookAnother view of my investmentportfolio, based on “sunrise industries”.. the most promising performers overthe next five Years.Keep adjusting the list, depending oneconomic data on “fastest-growingsectors.”
Designing your Own PortfolioMay 3, 20134Notes on capital market outlook: trendsa. Bondsb. stocks. If the index stocks continue to grow at 15% a year, the index could reach 13,275in five years’ time.Example of Long-Term Strategy on an overpriced Stock Market Index
Designing your Own PortfolioMay 3, 20135Stocks seem overpriced compared to past level. But stocks today, could be cheap comparedto probable... future levels. The key is to make an investment in an unknown future, whichis probably going to be brighter than the past.Example of a Short-Term Strategy, on an overpriced Stock MarketExample of Strategy, on the Cycles of an Individual StockSpace for Notes on “my own portfolio” ...