The thought processes in building a portfolio that works.

You want an investment portfolio that meets your financial objectives. 

Investors have obvious goals:  to produce wealth and to preserve capital.

You also want that portfolio to accomplish those goals quietly, with a minimum of upsets, a minimum of nerves, a minimum of complex mathematics, and most likely, a reasonable amount of effort on your part, because you are busy doing other things in life too.

The tiered portfolio is divided into three primary tiers:

1.  The Foundation portfolio
2.  The Rotational portfolio
3.  The Opportunistic portfolio.



The Foundation portfolio (80%)

This is set up to meet or slightly beat expected market returns, often with stable and somewhat defensive investments.

Dividend-paying stocks with rising dividends and growing prospects while at the same time exhibiting low downside risk and volatility are a pretty good fit.

These investments can be stocks or funds, and can be augmented by fixed-income securities, real estate, or other investments that meet this general profile.



Rotational (10%) and Opportunistic (10%) portfolio

The purpose of these is to achieve better-than-market returns, perhaps with more volatility, but these portfolios are small enough to contain risk and to avoid consuming too much of your investing time and bandwidth.



Putting together your portfolio

How your portfolio is put together is entirely up to you, not only because the portfolio needs to suit your tastes, intuitions and the facts at the time, but also because many of the investments (and the mix of investments) may not even be available, or priced right, at the time.

Building a tiered portfolio

This tiered portfolio has three segments:

1.  Foundation investments
2.  Rotational investments
3.  Opportunistic investments.


Foundation investments (80%)

These are like dividend-paying stocks that produce market (or better) returns with relatively less risk.


Rotational investments (10%)

These are mostly ETFs and inverse investments.  They add some defense and sector diversification to your portfolio.


Opportunistic investments (10%)

These employ a little more risk to boost returns.



Aim

The net result should be a portfolio that generates above-market returns with below-market risk.

Portfolio Management for the Lay Investor by Warren Buffett

As a small investor, you got a chance to be in thousands and thousands of great businesses and their prices change all the time; so their relative valuations change and you can make the exchange at very low cost, close to nothing. You can always shift from one business to another.

You have a huge advantage over the big boys, as they cannot shift their business to retail or something else so easily.  You can rearrange your business empire in your portfolio that you have at a moment's notice at practically no cost.  You have a huge advantage which, sadly, many turn into a disadvantage.

There is nothing in the price action of the stock that tells you whether you should keep owning the stock.  What tells you to keep owning it is - what do you expect the company to do in the future versus the price you are selling now.and compare to the other opportunity which you think you know equally well and make the same comparison.

You can check your portfolio regularly to see how to optimise the stocks in your portfolio.  There is nothing to stop you from checking this daily.  However, don't do it too frequently.




@ 33 minutes
Warren Buffett's advice on portfolio management for the lay investors.




Read also:  http://executiveeducation.wharton.upenn.edu/~/media/wee/course%20packs/wharton-investment-strategies-and-portfolio-management.pdf

Investment strategies and Portfolio Management

PROGRAM OVERVIEW
For finance or investment professional, change and challenge are constant, particularly in this volatile, complex marketplace. You are presented with diverse opportunities in emerging markets, real estate, hedge funds, derivatives, and other alternative investments. As the choices increase, shaping and monitoring investment portfolios becomes more complicated. Which investments will generate the highest returns without exposing you to excessive risk? In Investment Strategies and Portfolio Management, you will learn how to evaluate this fundamental issue and manage related risk to increase your effectiveness as an investment professional for your clients and your organization. This program examines specific investment areas such as stocks, bonds, derivatives, real estate, and global investments, giving you a solid foundation from which to build optimal investment portfolios and make better investments.

EXPERIENCE
Through the Investment Strategies and Portfolio Management program, you will increase your effectiveness as an investment professional and gain financial tools you can immediately put to use for your clients and your organization. Wharton’s Finance faculty facilitates highly interactive dialogues that demonstrate hands-on applications of portfolio and investment strategies. They, along with noted industry experts, examine current issues such as the market outlook, investing in emerging markets, alternative investments, and hedge funds. All content is designed for you to use practically and effectively once you leave the classroom.

5 Tips for a Better Stock Portfolio (Morningstar)

Portfolio Management - The Portfolio Management Process

The portfolio management process is the process an investor takes to aid him in meeting his investment goals.

The procedure is as follows:

1. Create a Policy Statement -A policy statement is the statement that contains the investor's goals and constraints as it relates to his investments.
2. Develop an Investment Strategy - This entails creating a strategy that combines the investor's goals and objectives with current financial market and economic conditions.
3. Implement the Plan Created -This entails putting the investment strategy to work, investing in a portfolio that meets the client's goals and constraint requirements.
4. Monitor and Update the Plan -Both markets and investors' needs change as time changes. As such, it is important to monitor for these changes as they occur and to update the plan toadjust for the changes that have occurred.

Policy StatementA policy statement is the statement that contains the investor's goals and constraints as it relates to his investments. This could be considered to be the most important of all the steps in the portfolio management process.The statement requires the investor to consider his true financial needs, both in the short run and the long run. It helps to guide the investment portfolio manager in meeting the investor's needs. When there is market uncertainty or the investor's needs change, the policy statement will help to guide the investor in making the necessary adjustments the portfolio in a disciplined manner.

Expressing Investment Objectives in Terms of Risk and ReturnReturn objectives are important to determine. They help to focus an investor on meeting his financial goals and objectives. However, risk must be considered as well. An investor may require a high rate of return. A high rate of return is typically accompanied by a higher risk. Despite the need for a high return, an investor may be uncomfortable with the risk that is attached to that higher return portfolio. As such, it is important to consider not only return, but the risk of the investor in a policy statement.

Factors Affecting Risk ToleranceAn investor's risk tolerance can be affected by many factors:

• Age- an investor may have lower risk tolerance as they get older and financial constraints are more prevalent.
• Family situation - an investor may have higher income needs if they are supporting a child in college or an elderly relative.
• Wealth and income - an investor may have a greater ability to invest in a portfolio if he or she has existing wealth or high income.
• Psychological - an investor may simply have a lower tolerance for risk based on his personality.

Read more: http://www.investopedia.com/exam-guide/cfa-level-1/portfolio-management/portfolio-management-process.asp#ixzz1yfBLNFTr

Record keeping to monitor and manage the performance of your portfolio of shares.

Keeping records of your shares

Many investors put considerable time and effort into the initial planning of their portfolio and choosing the shares they buy.  Yet for some reason, many don't put the same time and effort into monitoring and managing the performance of their portfolio once it has been established.


Regular review of your portfolio is vital to establish whether your investment goals are being met. #    Many investors have a complacent attitude to investing.  As a result, they lack the market information necessary to make informed investment decisions, are forced to behave reactively and may end up losing out.  However by tracking your portfolio, you will give yourself the chance to plan ahead and take advantage of opportunities such as buying more shares in a particular company that, by your reckoning, is trading at a discount.

Example:
June - Check portfolio
July - Talk to accountant
August - Rebalance portfolio
September - Take sharemarket education course
October - Update dividend information in portfolio records
November -
December - Talk to advisor.

As the sharemarket is continually changing, it requires regular attention, yet there are no hard and fast rules as to how often a portfolio should be monitored.  The performance of volatile shares may need to be checked several times a day, while more stable large capitalisation companies can be reviewed at longer intervals.

To track your portfolio effectively, you need to know where to locate useful information and be able to understand how it affects the shares you own.

You may be liable to pay tax on any  money you make from shares in the form of income or capital gain in certain countries.  These tax offices of these countries will need details of both income and capital gains (or losses) that you make to calculate the tax you may owe.  However, by maintaining simple, accurate and complete records you will be able to ensure that you pay the appropriate tax without incurring large accounting fees.

If you do want to do the record keeping yourself, the 2 main types of records required to keep track of sharemarket investments are:

1.  Records relating to income for income tax purposes, including, dividend, dividend reinvestment or interest payment advice slips all of which generally are issued by company share registries to the holder's registered address; and

2.  Records relating to purchase and sale prices for capital gains tax purposes, including contract notes, copies of applications made for initial public offerings, dividend reinvestment and bonus shares plan advice slips.

Generally records are required to be kept for 5 years.  However, the events that mark the beginning or the end of the retention period vary according to the relevant provisions of the particular law.

Computer software packages and ledger sheets are available to assist you with your record keeping.  If you prefer to keep paper-based as opposed to computer-based records, an investment ledger will provide you with an easy and convenient way to keep records of your share transactions.


http://www.asx.com.au/courses/shares/course_07/index.html?shares_course_07
Download example spreadsheets for keeping track of your shares.


 #  For example, you might be aiming to achieve an average after-tax dividend yield of 4% p.a. and capital growth of 8% p.a. over the next 10 years.  In that case, you could buy some shares that provide reliable, tax-effective dividends and the expectation of solid year-on-year growth.

Personalized Wealth Management Solutions

Our approach is best reflected in our portfolio management principles:

• In partnership with our clients
• Big Picture fit
• Wealth preservation first
• Focus on absolute returns

http://www.bfi-wealth.com/index.php?id=24

Core Value Equity - Security Selection Process

Make Millions From Thousands

By Selena Maranjian 
Comments (0)

I could write this article the usual way -- by showing you how to turn your thousands into millions through investments in solid, growing, well-known companies. Union Pacific (NYSE: UNP), for example, has grown by a compound average of more than 12% annually over the past 10 years, whileApple (Nasdaq: AAPL) has averaged 27% over that same period! Not too shabby.

But can such returns turn your thousands into millions? Yes, eventually. An investment of merely $10,000 would turn into $1 million in 30 years, if it grew at an annual average of 17%. But that's a fairly steep rate to count on for your stock investments -- a number to which only a select few master investors can aspire. It's safer to have more conservative expectations -- perhaps closer to 10%, the stock market's historical average annual return over most of the past century.

A fine balance 
So what should you do if you don't want to wait 50 or more years to make millions? Here's one option: Take a few chances.

With most of your money, you shouldn't take crazy risks. You might want to sock much of it away in a broad-market index fund, such as the Vanguard 500 Index (VFINX). That low-cost fund should earn you close to the market's historical return over long periods of time. You might also try S&P 500 Depositary Receipts, an exchange-traded fund also known as SPDRs. Either of these options will instantly invest your money in 500 major American companies, such as Disney (NYSE: DIS) and Motorola (NYSE: MOT).

But once you've done that, take a few chances and supplement your index with growth-stock picks. That's what I'm doing in my own investment account. I don't want all of my money in an index fund, because I'd like my portfolio to grow faster than average, so a chunk of my nest egg sits in a variety of individual stocks.

This strategy should help moderate volatility, and it can also allow you to do well with some carefully chosen stocks -- as it did for me, when I turned $3,000 into $210,000. (It also helped me triple my money in a year.) If you don't believe me, read Paul Elliott on how one stock can change everything. He describes how $1,800, the cost of a fancy TV, can turn into $190,000, the value of an entire home, when you break rules.

Aiming for the stars 
Such returns, which come from classic Rule Breaking companies, are too tempting for me to ignore. That's why I'm still on the lookout for young, dynamic companies that are breaking the rules as they grow and prosper.

The kinds of companies I'm talking about are tomorrow's Google (Nasdaq: GOOG),Amazon.com, and Wal-Mart (NYSE: WMT). Think about how different the world was before them. We would have laughed at the thought of being able to look up almost anything online. We couldn't imagine buying books (and cookware and lawnmowers) on our computers. We wouldn't have been able to find low-cost discount stores in small towns across America. These companies all broke their industries' molds and introduced newer, better systems.

Even Ford was a Rule Breaking company once, too, daring to make a luxury item available to the masses at an affordable price. Just try to imagine a world without cars.

Find a few rockets 
Seeking out and investing in Rule Breakers requires patience and entails risk. However, just one growth rocket has the potential to supercharge an otherwise stodgy index strategy.

This article was originally published on July 7, 2006. It has been updated.

Reviewing my investing through some old postings

Investment Policies (Based on Benjamin Graham)

KLSE Counters on my radar screen.

My recollection of the 1997 Asian Financial Crisis

PETRONAS Dagangan Berhad

Coastal

Telling an old story

Only 37 stocks in KLSE main board are suitable for long term portfolio

Short-term gain, long-term pain

 iCap Closed End Fund Track Record for last 2 years

 Should you hold iCap?

 Where is your focus in your investment returns?

An occasional rumination

 Be shrewd

 Be very shrewd

Which one stock excites you in the glove sector?

 Multiple baggers in KLSE

 Performance of Top Glove since listing

 Did you sell when the stocks were in stratosphere?

Reviewing my Sell Transactions

Core-satellite Portfolio Management

The core-satellite portfolio strategy is a relatively new concept that bridges the never-ending debate between the respective benefits of active and passive portfolio management.

The core-satellite portfolio approach optimises both passive and active management strategies.

• Such a portfolio approach is divided into a core component, which usually forms the majority of the portfolio that is passively managed.  
• The rest of the portfolio is called the "satellite", which is an active component in an attempt to generate alpha returns, i.e. risk adjusted returns.  

The allocation mix between the core and the satellite components within the portfolio is flexible and it allows investors to select and optimal mix that would best represent their desired portfolio risk-return characteristics.

The core-satellite portfolio concept is very suitable for big investors who are often long-term investors.