How To Build A Long Term Portfolio

[makybe04]

Hi guys,

I have just started my first job after uni as a grain trader in Perth. I trade forex and CFDs with some good success also. Now I actually have some decent money to invest in both the share market and fx accounts I'm stuck with a bit of a problem.

I'm aiming to have around 2k to invest in shares each month. I have the shares that I would like to purchase for a long term high dividend strategy (aiming for a portfolio of around 10 companies).

The issue is do you think I should be buying 1 company at the end of each month worth 2k or should I split this in to say 2 companies worth 1k each and add say another 1k or more down the track and dollar cost average I guess. It is going to cost me more in brokerage but it will diversify my portfolio some what.

Basically I'm just after some opinions on starting and growing a portfolio. I'm rather bullish leading in to 2012, I only wish I had started work earlier to take advantage of the October gains.

Thanks in advance for any advice.

 

[snsdmonkey]

Why trade into a new field when you already have your field of expertise?

 

[makybe04]

Good point. I guess the problem is trading fx markets now I'm Perth is that London opens at 3pm when I'm still at work which takes away a really lucrative trade that I often do on opening, I will have to see how I can adapt my fx and CFDs trading over here in Perth.

Probably the biggest reason would be due to diversifying my assets. I'm looking to have cash in a high interest account. Majority in fx and some in the share market. Why it isn't all in my fx account just yet is because I'm not fully convinced that I can trade a 10k account consistently profitibly just yet but I'm not far away. My lifestyle factors in to it also. Long term shares I can almost buy and forget where the fx I need to be actively trading so stuff like playing footy or spending a few nights away from the computer would probably be out of the question.

 

[tech/a]

One Stock

 

[robusta]

One Stock

Definately.

It would also be a advantage with this averaging strategy to try to buy on the dips - just wait for the next negative headline.

 

[nomore4s]

Or why not buy 2-3 stocks once or twice a year?

Saving the money in a high interest account until a stock that meets your selection criteria meets a reasonable entry area.

IMO buying 2k worth of stock every month just because you have the money there is going to put you behind the eight ball especially in current market conditions, if we were in a raging bull market then it may just work.

If you are truly trying to build a long term portfolio, what's the rush to get invested? Again you need to take current conditions and market risks into account, there is a real possibility of a black swan event happening in the near future then at anytime over the last 20 years imo - think a 1987 style crash where prices open 20-30% lower the next day. Think about all the issues economies overseas are having atm and tell me we couldn't see that sort of overnight crash in the next 12-18 months. Of course there are always chances of black swan events occurring but current conditions are nearly the perfect storm to cause one, so risks of black swan event are higher now then anytime in the last 20 years.

Even though you have said you are bullish for 2012 you need to make sure you are not being blinded by the lure of wanting to invest money because it is there to invest. IMO now is not a good time to be starting a long term buy & hold portfolio but it is a great time to be building a war chest for when prices really are cheap. Would you care to elaborate why you are bullish for 2012?

No matter what long term buy & hold types might tell you timing is everything, we all have limited capital to invest and we should make sure we get the most out of that capital. So making sure we can reduce our risks and exposure is essential. Having a portfolio underwater for 2-3 years because we were impatient and just had to have money invested in the market is both stupid and a waste of 2-3 years. Surely having that money earning interest while educating yourself and developing a solid strategy that gives you a better chance of receiving a positive return on your portfolio from the start is a much better idea?

 

[Atomic]

Or maybe just use other peoples money, leverage to invest(borrow) as you are a grain trader in perth , and in your chosen profession already using other peoples money , why not just shadow trade futures as you would at the 9 - 5 job.

 

[Julia]

Or why not buy 2-3 stocks once or twice a year?

Saving the money in a high interest account until a stock that meets your selection criteria meets a reasonable entry area.

IMO buying 2k worth of stock every month just because you have the money there is going to put you behind the eight ball especially in current market conditions, if we were in a raging bull market then it may just work.

If you are truly trying to build a long term portfolio, what's the rush to get invested? Again you need to take current conditions and market risks into account, there is a real possibility of a black swan event happening in the near future then at anytime over the last 20 years imo - think a 1987 style crash where prices open 20-30% lower the next day. Think about all the issues economies overseas are having atm and tell me we couldn't see that sort of overnight crash in the next 12-18 months. Of course there are always chances of black swan events occurring but current conditions are nearly the perfect storm to cause one, so risks of black swan event are higher now then anytime in the last 20 years.

Even though you have said you are bullish for 2012 you need to make sure you are not being blinded by the lure of wanting to invest money because it is there to invest. IMO now is not a good time to be starting a long term buy & hold portfolio but it is a great time to be building a war chest for when prices really are cheap. Would you care to elaborate why you are bullish for 2012?

No matter what long term buy & hold types might tell you timing is everything, we all have limited capital to invest and we should make sure we get the most out of that capital. So making sure we can reduce our risks and exposure is essential. Having a portfolio underwater for 2-3 years because we were impatient and just had to have money invested in the market is both stupid and a waste of 2-3 years. Surely having that money earning interest while educating yourself and developing a solid strategy that gives you a better chance of receiving a positive return on your portfolio from the start is a much better idea?

Great post. I agree with all points.

 

[So_Cynical]

Put 4K into one stock every 2 months...make a watchlist of your 10 targets and buy what ever is cheapest by comparison every 2 months.

 

[SuperGlue]

Maximum salary sacrifice into your superannuation ( $25K - below 50yo.) - 15% tax, you are ahead on the tax side.

Start young with a solid base in your super.

SMSF when sufficient.

With your knowledge about the market,

That will be one might long term portfolio.



I wish I had done that.

 

[poverty]

While your portfolio is small especially you could take advantage of any dividend reinvestment plans to increase your positions without further brokerage.

 

[makybe04]

Hi guys,

It is about 6 months since the creation of this thread. I have been trading fx with a really good return in that time. I'm going to increase the amount of my income that I invest in fx to something like 15% cash, 35% fx and 50% shares.

As for building a long term share portfolio, I took the advice of some of posters above who said to save up some cash in a high interest account and invest in to 2 or so companies maybe 3 times a year. I am about at the stage to make my first purchases.

I was also wondering what people thought about index funds?

 

[robz7777]

I was also wondering what people thought about index funds?

I like Index funds with a regular investment every week, fortnight etc.. The most basic set and forget strategy, you know what you are getting, no need to read announcements.. Only time you need to think about it is tax time.

 

[Bill M]

Only time you need to think about it is tax time.

And even then they give you a comprehensive end of year tax statement, so very easy to do.

 

[Julia]

I like Index funds with a regular investment every week, fortnight etc.. The most basic set and forget strategy, you know what you are getting, no need to read announcements.. Only time you need to think about it is tax time.

Why would you just automatically buy every week or fortnight, apparently with no regard for the price at that time.?
You could end up buying the peaks.
Why not take slightly more time and choose your entry more carefully?

If you can only be bothered with a 'set and forget' strategy, and have no interest in following news and announcements, your results will reflect this lack of care imo.