Designing a QUALITY Investment Portfolio That’s Just Right For You

No one knows your own personal financial situation better than you do.  Every individual possesses their own unique investment goals, objectives, needs and risk tolerances.  At first glance this may seem simple and straightforward to the point of stating the obvious. 

However, I contend that the reality that individuals have different financial situations, goals and objectives is profoundly important as it relates to designing an appropriate retirement investment portfolio.  There is no such thing as one-size-fits-all when designing the appropriate QUALITY Investment portfolio, or any type of portfolio for that matter.

I believe that a portfolio should be designed to meet the unique needs and goals of the individual it is built for.  To me the first and perhaps most important step is to ascertain a realistic assessment of the investor’s tolerance for risk.  This will establish a foundation of what types of assets the investor would be capable of staying the course with. If the investor cannot tolerate the high risk necessary in order to achieve a high rate of return, the odds of a successful long-term outcome are greatly diminished.

Once risk assessment is established, the next logical step when designing a QUALITY Investment portfolio is to determine the amount of income the investor needs to support them.  Just as it was with risk assessment, income goals also need to be realistic and consistent with risk tolerance.  After establishing risk tolerance and income needs, it then becomes reasonable to evaluate total return potential.  Once again, realism comes into play.  Investors need to understand and accept the reality that there is generally a trade-off between rate of return, income and risk.

When designing your QUALITY Investment portfolios it’s important to focus your attention on building a portfolio that will meet realistic goals and objectives.  Obtaining the highest possible total return is not always the proper approach.  If income is your objective, it makes more sense, to me at least, to focus on the dividend potential that your equity portfolio is capable of achieving.  Dividends are more predictable, and I contend, reliable than attempting to guess where stock price might go.

Moreover, if you invest in high-quality dividend growth stocks when valuations are sound, you do not necessarily have to give up capital appreciation or an attractive total return.  A carefully selected portfolio of high-quality dividend growth stocks is a proven strategy for generating a consistent, reliable, and best of all, growing income stream.

We need to dig in and analyze the companies. Using a quantitative analysis such as the LUMIBASIS allows investors to compare stocks without letting emotions or behavioral biases influence their choices in picking stocks. We want to find the stocks that offer a bargain (or at least a fair) price for the value of the company.

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Disclaimer:

LUMIBASIS has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.