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4 Ways to Simplifying Your Investment Portfolio

Now that you know the secret of the number of portfolios you should have, it is time to find out what belongs inside of them.

If you google investment portfolio images chances are you will get a ton of pie graphs with all sorts of percentages for each division representing elements of your “should have” portfolio that make little or no sense.  On top of that, if you compare the pie graphs everyone will have a different section than the other. Or, as I like to think of it, too many cooks in the kitchen offering too much advice.

Portfolios, just like everything in life, can be and should be simplified.

Related Read: What Type of Investor or Trader Do You Want To Be?

how to start investment portfolio

4 Ways to Keeping Your Investment Portfolio Simple

Fixed Income – CD’s, Bonds

Income (Interest or dividends)

Capital Growth – increase in growth in price from your equities and funds from when you buy it to when you sell it

Cash – I don’t like to add this to the mix, cause it is kind of a given. Your cash should be kept separately and you should take out an allotted amount for your investments either monthly, quarterly or bi-yearly.

Related Read: What are Investment Mandates and Why Do You Need them?

Breaking Down the Portfolio Process

These are usually good starting points to look for when building a portfolio. However, the fun begins when you dig deep into each section.

Fixed Income – this is great for less risk and low reward. The greatest benefit of it, is you know your money is safe and sound.  I recommend it for Retirement funds and Education funds.

Income – this is simply one of my favorites and should be heavily added to all your portfolios. Dividend stocks that have strong fundamentals, will bring you both income and capital growth. Kind of a double win-win situation.

Capital Growth – This is for the more aggressive investors. Here your main concern is to see that the shares you buy are growing in price. Dividends aren’t as much of a focus, which means you will allocate money to shares that don’t bring in dividends but hope for the price to rise after you buy. I recommend this to be in your liquid portfolio, that you can get in and out of this quickly.

There are several ways to enjoy this growth. The least risky are index funds. Mainly you are investing in the main indexes of the stock market. For instance the Dow Jones Index, S&P 500 Index, Nasdaq Index. These are just a few.

The other way for growth is finding companies that are in the growth stages of their company, which can be risky cause one never knows when the growth will stop. But if you play this part right, you can make grow your portfolio. One thing to remember, with these stocks, this is more for shorter term investing rather than the buy-it-and-leave-it style.

The Trader Chick’s Luscious Nugget of Recommendation– Capital growth section will vary with each portfolio. Since it can be the most aggressive portion of it, you’ll need to keep a much closer look out for it. This is where you ‘play’ more than just sit and invest. However, if you love a company and know it is solid and are in it for the long haul, then super. Buy it and sit on it. Also if you invest in companies that have been around for ages, Blue Chip companies, I would focus on the ones that bring in dividends as well and you don’t have to worry to much about them going up or down and the income is coming in monthly.

Long Story Short

Don’t bother yourself with all the other little slices that make up everybody’s cute, three-dimensional pie charts. Three to four sections (forth being your actual cash), is all you need. And personally, I like to keep it at three.

Keep it Simple, Sexy and you will be much more successful at it.