Putting together a portfolio is one way to finance a comfortable retirement. However, in the chaotic world that is stock-investing, how to put together a strong portfolio remains, by and large, an unanswered question. On the other hand, you have a diverse set of choices for investments; by taking advantage of all different types of investment selections, you can create a portfolio with a steady income flow.
Procure a newspaper that lists the companies on the New York Stock Exchange. This list of companies will be the focus of your research.
Evaluate the companies. You can use Finance.Yahoo.com or StockCharts.com to investigate these companies and their stock. Make note of their risk factors, their industry category and whether they pay out dividends.
Divide the stock of the companies into categories. Create these categories: stock of small companies of growing industries, stock of medium-sized companies in established industries, low-risk stock and dividend-yielding preferred stock. Put all the companies you can into the appropriate categories; cross out the remaining companies.
Purchase stock in small companies in young, growing industries. Choose a company that has fast revenue, high profit margins and high-speed earnings growth. The objective with this stock is to maximize capital appreciation though taking a relatively high risk.
Acquire stock in competitive, medium-sized companies in already well-established industries. Make sure the industry you choose does not strongly rely on certain time periods, such as seasons. This means you need to pick industries that are constantly in demand, such as food, medical, electric or oil industries. The purpose of buying this stock is to add a steady stream of income to your portfolio.
Purchase low-risk stocks. Check rating services to find companies of ratings of A, AA or AAA using Standard & Poor’s rating system. Buy stock in these companies (see resources). If successful, this stock will allow you to maintain capital gains.
Purchase low-risk non-stock investments and preferred stock. These investments include high dividend-yielding preferred stock, real estate investment funds, and U.S. zero coupon bonds. This type of investment will allow you to preserve capital while protecting against inflation.
Review your portfolio at regular intervals. As you age, you should begin switching out of the higher-risk choices into the lower-risk ones.
- “Lifespan Investing: Building the Best Portfolio for Every Stage of Your Life;” Clifford Pistolese; 2008
- “The Intelligent Portfolio;” Christopher Jones; 2008
Having obtained a Master of Science in psychology in East Asia, Damon Verial has been applying his knowledge to related topics since 2010. Having written professionally since 2001, he has been featured in financial publications such as SafeHaven and the McMillian Portfolio. He also runs a financial newsletter at Stock Barometer.