Sunday, 18 October 2020

How to INVEST NOW and CREATE a Portfolio?

Earlier, I had mentioned that NOW is the right time to invest. 

Is "NOW" The Right Time To Invest?

In this post, I will reveal “HOW” to invest now? 

DETERMINE HOW MUCH TO INVEST

To reiterate on what was already mentioned in previous post, you should first set aside your emergency funds and invest the amount of monies that you are not going to use. Then decide on how much you want to invest. 

The absolute value affects your investment allocation. For example, you only want to invest 10K, then it does not make sense to have a diverse investment portfolio. In this case, you can just choose a few stocks to invest. 

CREATE AN INVESTMENT PORTFOLIO 

On the other hand, if you have 100K or more to invest, then you should create an Investment Portfolio that comprises of different asset classes. For instance, Cash, Bonds, Precious metals (Gold and Silver), Shares etc. To simplify, you can take below as reference. 

 My advice is to have 50% shares investment for a start. Then 25% cash-bonds, and 25% precious metals (gold and silver) and crypto (maybe!). 

Also read: If I have excess 100K now, how should I invest over the next one year?

Cash / Bonds

It is always advisable to keep some cash as opportunity funds to take advantage of “stock price crash” to buy cheap during an economic crisis. If you do not like the fact that Cash generates almost no return. Then you can buy bonds. Do note that bonds issuer can default, and corporate bond price can also decline before maturity.    

Precious metals

The precious metals act as a hedge and “normally” has inverse relationships to economic crisis.  Hence, if crisis causes share prices to tumble, you can sell the higher priced precious metals to take advantage of the cheaper shares. Or at least you will not see excessive “bloodshed” in your overall portfolio during crisis. 

No hard and fast rules in allocation

There are no hard and fast rules that you definitely must adhere to the above percentage distribution. Or whether you definitely should invest in Technology or REITs. Invest and allocate where you feel most comfortable, after reading the reports, and doing your evaluation! You know yourself best, don’t be over restricted by rules! 

  • Tech Bullish: More growth, also more decline? less dividends and more risk? 
  • REITs Bullish: Hungry for dividends! More stable but not immune to decline. Covid-19 has “bloodshed” many Reits. 
  • Others: Can be Energy or Defensive stocks like Staple, Healthcare, Telco etc. 

“Defensive” stocks use to be more immune during crisis, however times have change. Covid-19! 

INVEST REGULARLY & LONG TERM

If every month, you have excess cash, you should invest in a progressive manner and regularly. This can average/eliminates any excessive asset price fluctuations. 

It is better to invest for long term. 10, 20, 30 years or more? Ok, too long for you… at least 5 years or until the peak before the next crisis. 

Learning when to sell is so important, although that is a separate topic altogether! 

INVESTOR NEED TO HAVE A STRONG STOMACH

Peter Lynch said: 

"In the stock market, the most important organ is the stomach. It's not the brain. On the way to work, the amount of bad news you could hear is almost infinite now. So the question is: Can you take that? Do you really have faith that 10 years, 20 years, 30 years from now common stocks are the place to be. If you believe in that, you should have some money in equity funds.

It's a question of what's your tolerance for pain. There will still be declines. It might be tomorrow. It might be a year from now. Who knows when it's going to happen? The question is: Are you ready—do you have the stomach for this? 

Most people do really well because they just hang in there."

MY PORTFOLIO




Rolf's Updates - My Priorities in Life - Health, Finance, Family, Friends & Hobbies – 2020 3Q

Rolf's Portfolio - 4 Sep 2020

Rolf’s Stock Portfolio – Why more than 50 percent is in Tech Stocks?

Rolf’s Portfolio, Stocks Mix and Investment Strategy


MY INVESTMENT PHILOSOPHY 

Below are posts written more than four years ago in 2016. 

Read: 

Rolf’s investment philosophy (Part 1) - Building a character!

Rolf’s investment philosophy (Part 2) – Understand the business!

Rolf’s investment philosophy (Part 3) - Building a Portfolio!


3 comments:

  1. Hi,

    My take is to invest and go for the generated dividend. Buy and hold strategy aligns with my preference.

    To each of our views.

    WTK

    ReplyDelete
    Replies
    1. Hi WTK, yes indeed that dividend strategy applies generally to most investors including me.

      Delete
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