FNArena’s Weekly Insights – October 18 2021

In this week’s Weekly Insights:

-The Basics Of Portfolio Construction
-Jumpin’ Jack Flash Lives In The Seventies
-Conviction Calls
-All-Weather Model Portfolio September Review
-Research To Download

By Rudi Filapek-Vandyck, Editor FNArena

The Basics Of Portfolio Construction

On my observation, the investment services industry is too much focused on providing the next hot tip and individual stock recommendations. Granted, there is obvious, natural demand for such ‘information’, but it is also my observation many an investment portfolio suffers from a lack of structure and/or a well-thought out strategy.

Hence, this week I am sharing my own thoughts and experiences with structuring and running an investment portfolio. May it help and assist those investors currently in the dark when it comes to defining a strategy and structuring their own longer-term oriented equities portfolio.

First up, I can report from personal experience, from the moment you are running a structured portfolio, you no longer are an investor in stocks. Just like a coach of a sporting team, you stop concentrating on each of your players individually. Instead, you start realising, and appreciating, the effort made as a team, though you never want to lose sight of the individual components, of course.

Putting a team together, which in this case equals a basket of stocks, starts with the realisation not all players on the field can be hot blooded race horses. The sun doesn’t shine every day, whole day and we must accommodate for four seasons that cannot be perfectly anticipated each and every time.

Hence we need some race horses, but equally a selection of sturdy, reliable muscle-machines that can pull a load when the weather is cold and the ground is wet and murky. Apart from the occasional exception, a well-diversified selection means the portfolio never sees all stocks rallying or all falling on a given day, in particular not with share market momentum as polarised as it is this year.

As an added benefit: come the next period of share market weakness, we might feel less inclined to sell everything and hide under the bed.

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