Stock Portfolio Management

How to make a portfolio of stock, including portfolio loans!

My stock portfolio management goal is an overall portfolio (annualized) internal rate of return (IRR) of at least 12-15%.

This will equate to a doubling of the portfolio every four to six years on average.

The stock portfolio software I use for portfolio tracking is an Excel spreadsheet, a template for which is available FREE online by contacting me.


Types of Stock

I aim for an approximate 50/50 mix of large cap and small/medium cap companies. This ensures a mix of growth and income-producing stocks.

My shares portfolio asset allocation includes a mix of approximately a sixty/forty ratio of domestic to international shares.


Portfolio Size

I hold a manageable number of shares in the portfolio so that reading and record keeping matches my available time.

The indicator of my portfolio becoming to large is that I am having difficulty reading all reports and announcements for the stocks in my portfolio on a weekly basis. I currently work with 15 - 20 shares.


Dividends

I keep the average dividend yield of shares in the portfolio above 4% to ensure a reasonable dividend cash flow.

This ensures that the interest charges on my margin loan (if activated) is covered and that the portfolio remains positively geared.


Tax and Gearing

At least 80% of shares in my portfolio are fully franked; that is, the company tax component has already been fully paid by the company. This either reduces my tax burden in high taxable income years or increases my cash returns in low income years.

Depending on the state of the market, I may gear the portfolio using portfolio loans via a margin loan to magnify earnings. Gearing is kept no higher than the 20-40% range to avoid margin calls.

The portfolio loans gearing level is varied depending on my judgement of the overvaluation of the market and of individual shares.

As I commence staggered selling of overvalued shares, my gearing level starts dropping towards 0%.

In Summary ...

While my stock portfolio management plan suits my purposes as a value investor, you should consider your own risk profile, investment time horizon and investment objectives when considering your own plan.

This particularly applies to taking out a margin loan which increases risk, and especially so if the companies that you are investing in have high debt to equity ratios.

Return from Stock Portfolio Management to Investment Plan

Return to Value Investing Home Page