ITA Wealth Management

Are you able to manage your own portfolio? If your answer is no, ask yourself why. What do you not know that keeps you from managing your own investments? If you are not yet involved in the stock market, you have come to the right place for some basic instruction.

It seems as if a high percentage of the working class has an interest in the stock and bond markets, yet many savers do not have a great desire to learn how to manage their own portfolio. There is a notion I should know something about the market, but I really don’t have the motivation or interest to learn what it is I need to know. Believe me, it is not that complicated if you take an index approach to investing. Check out the “Portfolio for Dummies.” If you want to move beyond the very simplest portfolio, here are a few basic principles.

• Save until you have dollars to open up a broker account. Check with a broker such as TDAmeritrade to see if they have a minimum amount. Remember The Golden Rule of Investing - Save as much as you can as early as you can.
• Learn how to access your broker account via the Internet. Remember, you are going to do this yourself.
• Begin to lay out a portfolio plan before you make any stock or bond purchases. Learn the principles of Asset Allocation.
• Begin reading one of the five most important books on my reading list. Yes, I know this begins to sound exactly what you did not want to do. However, it helps to have some background and knowledge of the stock market so you do not begin your investing career by making unnecessary mistakes. Look up “books” on this blog.
• While you are waiting for that investment book to arrive at your house, go back to the beginning of this blog and set a goal of reading a few entries each day. The entries are short so you can read several a day. Another suggestion is to click on the “Beginning Investors” category and read those entries first.
• Learn the language of cap size, value, and growth. Those terms are used frequently in this blog. Eventually they will become second nature to you. These terms will help you as you begin to lay out a plan for your portfolio.
• Check your asset allocation or portfolio plan with some suggestions given on this blog or in a few books that you are reading. Does the plan fit your requirements? Will you be able to sleep at night investing in these vehicles? Remember, we want to receive a respectable return while reducing risk.
• Use either index funds or their first cousin, ETFs, to build your portfolio. There are many examples on the free side of this blog how to do this, and if you want further detail, check out the “pay-to-read” or Premium Content side of this blog.
• Pay attention to costs as that works right down to the bottom line and therefore to the portfolio return.
• Understand the importance of diversity. Investing in eight to twelve different asset classes will assure you have a well diversified portfolio. There are many examples of this on this blog.
• Learn the principles of rebalancing the portfolio. This is something that does not happen frequently, but one does need to know how it works.
• To learn more about the fundamentals of asset allocation, check out Saul Seinberg’s Power Point presentation available through this blog. By September 4th, you will have another PP presentation available on this subject. For more information, search Asset Allocation on this bog and read those entries.
• Ask lots of questions. Each investor has questions that pertain to their situation. There are very few stupid questions, so please ask.

Lowell Herr

Photograph: Hillsboro Air Show