Traders Tools - How to Build a Share Portfolio
How to Build a Share Portfolio –
A practical guide to selecting and monitoring a portfolio of shares
By Rodney Hobson
Running an efficient portfolio of shares means buying and selling the shares that make the most sense for you. A new book from bestselling author and financial journalist Rodney Hobson shows how you can do this without being an expert or a full-time investor. How to Build a Share Portfolio simply and logically takes the reader through the process of selecting shares and constructing a portfolio, giving practical examples and case studies along the way so that you build a portfolio that is right for you.
Many investors pick shares that take their fancy, or perhaps even ones that have been recommended in the financial press, but this is often done without any thought for whether these selections create a balanced and suitable portfolio or whether that portfolio is meeting their needs. Often they will hang on to their purchases even if their investment circumstances or needs have changed. These are investing mistakes and the author sets out to address these in this book.
Hobson begins in Part One – The Choice of Assets by looking at exactly what a portfolio is and how the total value of a portfolio is of prime importance. A portfolio investor thinks about the total value of his portfolio rather than the success or failure of the individual stocks within it and, as such, he approaches investing in a very different way than just being concerned with picking a winner every time. Investors should take a sensible and disciplined approach to selecting a range of assets that should meet the criteria of balancing risk and reward.
So how exactly do you go about doing this? Hobson argues that it is not a complicated procedure. It simply takes some common sense and knowledge of exactly what you want out of your investments and also your life; for instance, requirements for a retirement portfolio would be very different to requirements for a portfolio built by a twenty-something. Building and maintaining this portfolio involves selecting appropriate assets, deciding how much to buy, maintaining a balance, and setting and measuring performance targets. He suggests asking some key questions before you begin, for example: do you own your own home, are you looking for capital growth or income, and how averse are you to taking risks?
Once you have the answers to these, you should then look at the various asset classes and what they can offer. Shares, cash, gold, gilts, company bonds, property, art, collectibles, funds and ETFs are covered here, with the merits of each examined, along with their costs and how they could work for you.
Part Two – Building a Portfolio goes on to look at exactly how you begin building this structured portfolio. Firstly, Hobson takes a look at the basics, so deciding how much you have to invest, your motivation for doing so, etc. After showing you how to decide how much you want to invest and when, Hobson then moves on to how you go about selecting the stocks that you wish to invest in. He looks at the relative merits of top down and bottom up investing, identifying the pros and cons in both of these approaches and illustrates them with helpful case studies from the milk industry and Sage. He also shows how to look at fundamental data, either future or past.
Even after they have gone to the effort of creating a portfolio, some investors will just stick their heads in the sand and hope for the best. Part Three – Managing Your Portfolio explores how to avoid doing this, ensuring you’re on the right track before you commit to any further investment. Hobson identifies several key ways to monitor your portfolio, the first being to keep a record of every purchase you make, with the name of the company, number of shares bought and also the price paid. Once you have done this, you can measure the performance of each one that you have recorded. Hobson argues that two major benefits come from doing this – firstly, you will notice when your shares are either under or overperforming, and secondly you can also see if your portfolio is becoming unbalanced. This information can then inform the choices you make about how to improve your portfolio and therefore your investment prospects.
How to Build a Share Portfolio is a useful and practical guide to building and looking after your investment portfolio. Anyone who is interested in investing would benefit from the information that Hobson gives, and similarly anyone who already has an investment portfolio will find it certainly helps to reassess whether that portfolio is meeting their needs.
Title: How to Build a Share Portfolio
Subtitle: A practical guide to selecting and monitoring a portfolio of shares
Author: Rodney Hobson
Publisher: Harriman House
About the author:
Rodney Hobson is an experienced financial journalist who has held senior editorial positions with publications in the UK and Asia, most recently as Editor of Hemscott, the financial news and information website.
Among posts he has held are News Editor for the Business section of The Times, Business Editor of the Singapore Monitor, Deputy Business Editor of the Far Eastern Economic Review, Head of News at Citywire and Editor of Shares magazine. He has also contributed to the Daily Mail, the Independent and Business Franchise Magazine.
He is registered as a Representative with the Financial Services Authority.
He is also the author of Shares Made Simple (ISBN 9781905641451), Small Companies, Big Profits (ISBN 9781905641789) and Understanding Company News (ISBN 9781906659226).
Rodney is married with one daughter.
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