New portfolio guiding principles
Introduction:
In general I like to aim for 10% annual returns and not more. Thats not to say I never make more, and if the opportunity arises I’ll take advantage of it, but aiming for 10% (and not more) will give me the flexibility to take advantage of such an opportunity when it arises. And 10% compounded quarterly will double your money every 7 years, which even without any additional contributions, will 140x over 50 years. So if you start today with $10k, in 50 years you’ll have $1.4M, even without adding a cent over that time.
Portfolio structure:
I want a certain amount of diversification in my portfolio, ie I don’t want to put all my eggs in one basket, but I also want the portfolio to be easily manageable. So lets think of our $100k portfolio as 10 investment blocks of $10k each. So if I can find 10 companies I want to invest $10k in each, that will fill the portfolio.
Timing:
The nasdaq is up ~100% over the past 2 years, which is historically unusual - the market historically averages 10%/year so companies are generally at high valuations. So on the one hand I don’t want to buy high, but on the other hand, I don’t believe in timing the market - fortunes have been missed out on, waiting for the market to drop. I believe time in the market is more important than timing the market. So I don’t want to invest all my money on the first day, rather to build out my portfolio over time so that if the market does go down, I still have money on the side I can use to lower my cost basis. This is called Dollar Cost Averaging, and is a smart way to invest consistently, no matter the market's ups and downs. Dollar cost averaging, in combination with high probability options positions, will enable me to make money consistently in varying market conditions.
Investing rate:
I’d like to set the portfolio up to make ~$20k over the next 2 years, but I’d like to be especially conservative in my positions because of how high the market is currently, and also scale into them over time. Dollar cost averaging into my positions by investing ~$12.5k every quarter means that I will scale into being fully invested in this portfolio over the next 2 years. So I will aim for an investing rate of ~$4k/month, which doesn’t have to be exactly linear, but that will be my guiding principle.
Strategies:
I will focus on simple to understand, low maintenance options strategies for this portfolio which will make it very easy to calculate investment size and potential gains/losses. I will make the trades in real time at real prices via webinar, where I will talk through the position itself, including investment size, best/worst case, and what I will do if the stock goes against my position. Sign up for an invite link to the webinar.
Performance:
I will track the portfolio weekly at the end of the week, and compare performance to s&p and nasdaq indices. I have 2 guiding principles for my investment strategy:
be the house, not the gambler - ie keep probability on my side
sell time, because time only goes forwards
Both principles will become clear after the first webinar, but basically they mean that wherever the market is today, no matter if it goes up, down, or sideways, if it gets back to the same place (or higher) in the future, I make money.
Where to go from here:
Sign up below join me on this journey, and learn how to put your money to work, and grow your savings responsibly.
