There are some basic factors to be mindful of when charting a portfolio.
First and most important is to make sure you are not in a position where you are simply waiting for the right price to come in and the right price can come in at any time. For this reason, I advise you to avoid buying a lot of your portfolio at the moment when a huge profit is possible. If you just want to build a long term portfolio of stocks, and the price rises from here on in, that may be fine. But if you are looking to get into a high tax advantaged retirement account, I would steer clear of picking too many stocks at one time and too big of a loss at another, while also not selling too big of your portfolio at one time. When you have all of your capital in the portfolio, no one else is going to have a market cap of the price you paid just for the stock itself when it came up. There may be other players like mutual funds and private equity, but the value of those investments is usually not what you are seeking. I would generally tell you to make your own decisions by putting your money into the right stocks, and you should be able to evaluate individual stocks and prices on an individual basis as well. I will say that if you are buying a portfolio full of the worst performing stocks, you may have to be careful how much you’re using the portfolio. You might have to buy a little more than what you need or less than most and you could go into a panic selling position if the stock prices turn down, as well as sell too much and see an immediate decline in the value of your investment.
For more guidance about stock picking, my blog post, “The 10 Tips for Stock Picks from Ben Graham” can be found here.
What about money vs. portfolio?
For most people, stocks are the best way to invest. In the long run, you’ll be better off investing in a portfolio full of stocks. But in the short term, stocks are good for a lot of things…
For example, it’s a great way to hold excess cash. As a long time reader, I’ve heard of times where you get a bit nervous holding a lot of cash. With stocks, you can cash out of them as many times as you want (assuming the funds are still working – and I am in no position to suggest otherwise), and then hold them as bonds. You can have stocks that are worth more than a lot
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