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Discipline With Your Portfolio

January 27, 2013

Being disciplined with your portfolio isn’t as easy as it sounds. In life, we can be spontaneous, which in and of itself is great. With your financial portfolio however, it is important to set some rules and stick to them. Like I said earlier on my website, , the order of my investment plan is not sequential and I want to start with Discipline. The idea of position size and diversification is key to success.

“If you don’t bet, you can’t win. If you lose all your chips, you can’t bet.” – Larry Hite

So with this in mind, you understand you must invest and you realize if you lose all of your money, you are back to square one. The point about portfolio size is this; it does not matter how big it is when you start,  it is what it is. If you start with $5000, $100,000 or more, you have to start somewhere.

This next point is very important; however much you start with or have at any point in the life of your portfolio, you must divide the dollar amount into 100 units. For example, if you have $10000 in your portfolio, divide it by 100 units and therefore each unit is worth $100; if you have $36,758, each unit would be worth $367.58 and so on.

It is important to never invest more than 5 or 6 units to any one position, not necessarily sector, but any one holding.I have an excel program that keeps track of the total dollars in my portfolio and auto calculates the maximum amount I can hold in any one position and auto adjusts as gains or losses occur. I’m happy to send it to you if you wish, just make contact on the contact form.

The exception to this rule is if you are just starting out with under $5000. In this instance, it would not be a bad idea to choose a basket of index and sector specific ETF’s (including fixed income) and divide the funds between them. If you want to move forward with a specific portfolio, understand that commission costs need to be monitored. There are service providers that have commissions from $1.00 to $9.99.

Next blog, I will continue with the division of asset strategy. I dedicate a certain number of units to each part of the portfolio to spread out the risk.

Until next time remember to use discipline with your portfolio!

Greg Hall




From → Personal Finance

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