Portfolio Building 101
« on: November 11, 2019, 01:14:01 PM »
When building investment portfolios the utmost importance must be given to several critical questions.

What is the objective of the portfolio (i.e., retirement saving, college funding, etc.)?   
  >...Taxable or tax deferred portfolio?
What is the risk tolerance?
  >...How much volatility is tolerable?
What is the time horizon?
What are the income requirements?
Who is the portfolio manager?


Which type of portfolio are you building?
  >...Conservative for income: 75% fixed income, 15% equity, 10% cash
  >...Conservative for growth: 55% fixed income, 25% equity, 10% cash
  >...Moderately risk: 35% fixed income, 55% equity, 10% cash
  >...Aggressive risk: 25% fixed income, 65% equity, 10% cash
  >...Very aggressive risk: 90% equity, 10% equity

General rules:
  >...Younger investors usually are more risk tolerant than older investors due to portfolio time frame.
  >...Households with high income may be more risk tolerant.
  >...Equities are usually more risky than fixed income investments.
  >...Asset allocation has the greatest bearing on portfolio performance.
  >...Larger net worth portfolios may be more risk tolerant than smaller portfolios.

How to create the portfolio:
  >...What is the dollar amount of the portfolio?
  >...Invest dollars according to desired asset allocation mix.

Possible portfolio selections:

Fixed income ETFs-
   SPDR® Portfolio Intermediate Term Treasury ETF (SPTI)
   Vanguard Intermediate-Term Treasury ETF (VGIT)
   SPDR® Portfolio Short Term Treasury ETF (SPTS)
   Vanguard Short-Term Treasury ETF (VGSH)

Equity ETFs-
   SPDR® S&P 500® ETF Trust (SPY)
   Vanguard Large-Cap ETF (VV)
   SPDR® S&P MIDCAP 400® ETF Trust (MDY)
   Vanguard Mid-Cap ETF (VO)
   SPDR® S&P® 600 Small Cap ETF (SLY)
   Vanguard Small-Cap ETF (VB)
   SPDR® Portfolio MSCI Global Stock Market ETF (SPGM)
   Vanguard ESG International Stock ETF (VSGX)
   SPDR® Portfolio Emerging Markets ETF (SPEM)
   Vanguard FTSE Emerging Markets ETF (VWO)

Ongoing maintenance - Regularly rebalance to stay within original asset class percentages.

Investment Account Manager software is designed to help investors build suitable, profitable portfolios.  We encourage interested investors try our free 90 demo version www.investmentaccountmanager.com.

Note: All asset allocation scenarios are for hypothetical purposes only and are not intended to represent a specific asset allocation strategy or recommend a particular allocation. Each investor's situation is unique and asset allocation decisions should be based on an investor's risk tolerance, time horizon, financial situation and market conditions. All investing is subject to risk, including the possible loss of the money you invest.


« Last Edit: November 12, 2019, 08:11:40 AM by Forum Administrator »