The STRIDE Blog

Retirement Planning: How to Build a Profitable Portfolio

stride-retirement-planning-how-to-build-a-profitable-portfolio-featured.jpgIt's meant to be a break from worry, but we all know the looming anxiety that retirement planning brings... that's why it's important to learn how to save for retirement as early as possible, and we'll tell you just how to do that. 

Retirement planning can be a bit of a pain, mostly because we're either bombarded with an onslaught of stock market terms or simply have no idea where to begin. A time that's meant to bring a break from stress is made into something else to worry about, which is why we've created our series of eBooks: A Practical Guide to Value Investing. In this series, inspired by the likes of Warren Buffett and Benjamin Graham, we'll teach you just how to be the intelligent investor of a profitable portfolio.  

Becoming an Intelligent Investor for Retirement

How to Invest in Stocks for the Long Game in 5 Steps:

    1. Portfolio management starts with a few things:

  • A safety net: Have 3-6 months' salary in your backpocket to protect yourself against poor investment choices, and so that you can make careful decisions to create a long-term portfolio in patience. 
  • Understand what's available to you: trading accounts, taxes, brokerages, etc.

    2. Create your individual investor's portfolio by considering:

  • Your geography: tax implications, available trading accounts, and access to online brokerages.
  • Where you want to trade: what are your country's policies regarding international investing, how does your currency stand up in worldwide trade, etc.
  • How you want to manage your portfolio: We recommend using a 30 slice model, as per our Asset Allocation and Effective Portfolio Management eBook. So you'll need to decide how much you plan to add to your portfolio over the first 3 years. Effective portfolio management happens by understanding your own situation to discern what level of risk you're happy to consider.
  • The time you want to invest: Different management styles and platforms require different time commitments - decide this as early as possibly so that you can decide what is the best fit for you.
  • Your budget: The cost of investing depends on your geography, particular trading account, taxes, trade size and frequency and your chosen brokerage system's fees. 

    3. Find yourself a broker: 

  • Full-service brokerage or online trading platform: both have their own costs and benefits, which you can read more about here
  • Choosing your brokerage platform will depend on: fees, personal level of control, diversification (Which countries do they have the ability to trade in?), ease of use, and "customer care". 

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    4. Make your first trade:

  • If you've followed the previous steps, this is quite straightforward. As you'll only need to follow your chosen brokerage platform's method of trading (they will likely offer a tutorial to you). Your portfolio slice size should have already been decided on.

    5. Build your portfolio:

  • You now need to build out your portfolio according to the strategy that you decided on in step 2 and began actioning in step 4. You'll do this by carefully selecting your investments and filling your slice size (recommended to be 30) over the next 3 years (with our recommendation, this means that you will only be able to buy a slice every 5 weeks for the first three years and that you will only have a 10 slice portfolio at the end of year one).
  • Selecting your investments will depend on:
  • 1) Timing and structure of investments: Being unrushed and ready to commit time to choosing your investments. As the more you trade, the more you will spend, and you want to minimise trading associated expenditure.
  • 2) The diversification of your investments: Diversification is about mediating your risk. This is why to diversify you'll need to consider your short and long-term goals by understanding your personal investor's profile, and then analyse which stocks fit your portfolio and can help to spread your risk. 
  • 3) Re-deploying your income: It’s a simple rule to end on - as soon as you have enough money to deploy another slice, go ahead and do it. Don't take from your portfolio's earning until it's matured. Rather stick to your plan and hold the impatience at bay. 

To understand this process, you can see it in action in our Little Acorns Portfolio blog series. Or to get your retirement planning underway, download our eBook below for a detailed approach on how to build your portfolio and investing for beginners.

In fact, with our eBook we're even offering a fantastic birthday discount! As we’ve been running for two years, we are offering subscribers the opportunity to get the next 2 years for the price of 1. Download our Practical Guide to Investing now, and flip to the last pages of the eBook to find your discount voucher. New Call-to-action

Topics: 3D Value Investing, Independent Investor, Valuation, Retirement Planning

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3D Value Investing: Triangulating The Best Investment Targets

3D Value Investing uncovers the best businesses for investment, the fair value of those businesses and the best times to buy in and sell out. This approach to long-term investing results in higher returns with lower risk.

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