How Do You Build a Beast Stock Market Portfolio in 2018?

TL;DR

Build a diversified individual-stock portfolio with four to nine holdings, balancing an “automatic” stock such as Apple, Google, or Facebook with growth stocks, low-P/E value plays, and a small speculative position. The speaker considers seven stocks an ideal target for stock pickers, particularly those ages 20 to 30, while suggesting index funds for people who cannot research companies closely. Read on for the complete portfolio framework and its risk controls.

Transcript

how to build a bee stock market portfolio that's exactly what we're talking about here today guys I guess so many questions from people all the time on like how to build up a portfolio like like what's your thought process behind it where do you put value stocks versus growth stocks and all those type of things how many stocks should a person own e... Read More

Key Insights

• *️⃣ Diversification is key in building a strong stock portfolio to mitigate risks and maximize potential returns.
• 🙃 Owning an "automatic" stock provides stability and potential long-term growth.
• ⚖️ Growth-focused stocks should have a balance of current performance and potential growth prospects.
• 🖐️ Value plays help maintain a balanced and safe portfolio.
• 🧘 A small position in a speculative stock adds excitement but should not compromise the overall portfolio's risk management.
• 👨‍💼 Avoid investing in unprofitable companies to build a portfolio focused on profitable businesses.
• 🔂 Avoid concentration in a single industry to ensure proper diversification.

Questions & Answers

Q: How do you build a diversified stock market portfolio?

Hold four to nine individual stocks and diversify across industries rather than concentrating in one sector. Combine an “automatic” stock with growth-focused companies, low-P/E value plays, and a small speculative position without compromising the portfolio’s overall risk management.

Q: How many stocks should be in a diversified portfolio?

The recommended range is a minimum of four stocks and approximately a maximum of nine. Fewer than four is described as too dangerous, while owning more than nine can make company research, news, and quarterly results difficult to track.

Q: Why does the speaker consider seven stocks an ideal portfolio size?

Seven is presented as the speaker’s “magic number” and roughly the perfect number of individual stocks to own. It sits within the suggested four-to-nine range while remaining manageable for ongoing company research.

Q: Who is this portfolio strategy designed for?

The strategy is tailored to stock pickers who research companies and invest directly in individual stocks. It is aimed primarily at people ages 20 to 30, although the speaker says people in their 40s, 50s, or 60s can adapt it.

Q: When should an investor consider index funds instead of individual stocks?

Index funds may be more suitable for someone who is not interested in researching individual companies. The speaker also suggests considering them when a person wants exposure to 20 or 30 stocks, because tracking that many businesses can become overwhelming.

Q: What is an “automatic” stock in this portfolio framework?

An “automatic” stock is intended to provide stability and potential long-term growth. Apple, Google, and Facebook are given as examples of this portfolio component.

Q: What role should growth stocks and value plays have in the portfolio?

Growth-focused holdings should already have something working in their businesses as well as prospects for meaningful growth over the next few years. Low-P/E value plays add balance and a safer value proposition so the portfolio is not composed entirely of growth stocks.

Q: How should speculative stocks and unprofitable companies be handled?

A speculative stock should occupy only a small position so it does not undermine the portfolio’s risk management. The framework also advises avoiding unprofitable companies and focusing the portfolio on profitable businesses.

Summary & Key Takeaways

• Building a diversified stock portfolio involves owning at least four stocks, with a maximum of nine to ensure proper management of research and information.

• An "automatic" stock, such as Apple, Google, or Facebook, is recommended for stability and potential long-term growth.

• The portfolio should include growth-focused stocks, value plays with low P/E ratios, and a small position in a speculative stock.