How To Manage Your Portfolio Like A Pro – Part I

Listening to any financial broadcast on CNBC can leave you feeling lost and confused. Financial networks inundate you with information that can leave you wondering how anyone could ever manage their investments without help.

How To Manage Money Like A Pro

Fear not. There is hope. Managing your retirement portfolio is not as complicated as it sounds. With a little bit or education, training, and practice you can manage your portfolio every bit as well as any financial planner out there today.

Why Be Your Own Money Manager

As I discussed previously, I am not a fan of financial planners and advisors.

IMO financial panners are nothing more than high-priced salesman that make money from you no matter if you do well or not. If lucky enough to find a competent advisor, they suck hard-earned money out of your portfolio with their high fees.

The reality is that no one cares about your finances more than you so why not take control and do the driving yourself?

How To Manage Money like A Pro

Is it hard to do especially if you struggle to balance your checkbook? It is not only possible but highly probable that you can manage your own investments.

In fact, investing on your own today has never been easier. With a plethora of budgeting apps for managing your money (i.e., Mint, Personal Capital, Stash, and Cleo to name a few), automating your daily finances has never been easier. These apps can take a lot of pressure off you so you can focus on learning how to invest your retirement portfolio.

There are a ton of websites and online tools you can use to analyze stocks, develop portfolios, and assess risk. Sites such as Yahoo Finance, Motley Fool, Rule 1 Investing offer data, tools, and advice on how to evaluate companies in order to find good deals.

Understanding the basics of portfolio management is a great starting point. By learning the basics, your arm yourself with the same tools that financial advisors use to manage your portfolio and can maximize your returns.

With consistent effort and practice, it won’t take long to get up to speed on how to manage your portfolio just as well, maybe even better, than any financial advisor you may come across.

Still worried and not sure how to get started? Here are a few suggestions to get you on the right track.

Create An Investment Philosophy

Creating an investment philosophy is knowing exactly why you are investing and understanding what you expect from your money. Without a philosophy, you are going to be a rudderless ship drifting at sea hoping you get to your desired destination.

Here are a few questions you can ask yourself to understand your investing philosophy:

  • What is your primary objective?
  • How involved do you want to be? Active? Passive? A little of each?
  • How much of your portfolio could you stand losing before it rebounds? 20%? 50%?
  • Do you prefer investments that are focused on growth, invest for dividends, or do you want to find great companies on sale (value investing)?
  • Other than stocks, are you interested in exploring alternative assets like real estate, precious metals, cryptocurrency, etc.?
  • What else do you own or want to own that is at risk? How to mitigate those risks?
  • How long are you willing to stay with a strategy? What would make you change?
  • When and why do you re-allocate?

If you are still stuck with how to create an investment philosophy, let me try to help by sharing my investment philosophy.

My investment philosophy is to invest in a blend of traditional and alternative assets. Stocks are one of the best growth investments out there but also the most volatile. Stocks can potentially lose 50% (or more) of its value before rebounding.

While I firmly believe that stocks belong in my portfolio, I am not going to follow the traditional investor strategy and invest the bulk of my investments in stocks, mutual funds, and index funds. Bonds used to be part of most people’s investment portfolio because it was a great hedge against stocks collapsing, provided consistent income, and were low risk.

However, with the record low bond yields, it doesn’t offer the same advantages that it used to. Instead, I plan to use alternative investments, including real estate, to hedge against a stock market collapse and future inflation risk.

Physical real estate has a ton of positives including consistent predictable cash flow, hedge against inflation, property appreciation, and even a fairly consistent rate of return. If not wanting to manage the properties yourself, hire a realtor/property manager (BiggerPockets can help you find these people). That way they have skin in the game.

If physical real estate is a still not appealing to you, there is always crowdfunding real estate. Depending on if you are an accredited or non-accredited investor, there are several platforms to choose from (i.e., Fundrise, Crowdstreet, RealtyMogul, etc.) that can offer real estate exposure, generate income, and even stable returns.

Another alternative asset few people talk about but has a lot of potential is permanent life insurance. Most people are used to term insurance which only has a benefit to the deceased’s relatives upon their demise. Permanent life insurance has a ton of benefits that favor the living including paying for a retirement home if you are unable to perform basic life functions, cash value that grows tax-free and can be accessed while living, protection against a stock market crash, and access to life insurance benefits in case of a chronic or terminal illness.

If you want to learn more about permanent life insurance, read my article about the pro’s and con’s of life insurance.

Other possible alternative assets to delve into are precious metals, P2P lending, and crowdfunding businesses. If you want to learn about alternate investment options, read the article that I posted.

 My end goal is to have the following ratio in my investment portfolio:

  • Stocks that provide a dividend – 35%
  • Precious Metals – 5%
  • Alternative Assets – 60%
    • Real Estate – 35%
    • Life Insurance – 10%
    • P2P / Crowdfunding – 10%
    • Cryptocurrency – 5%

The end goal is to maximize returns and minimize risk. I chose investments that generate cashflow to meet my basic needs so I won’t have to dip into the principal. I prioritize cash flow over appreciation since when I retire, I need cashflow to live on not appreciation. I also want to recoup any investments as quickly as possible, so my base money invested is at risk as little as possible.

I also invested heavily in alternative assets to offset any potential losses from my stock investments and hedge against inflation.

I plan to reallocate investments once a year to maintain the ratios. If some investments do better than others, then I’ll sell off the surplus and re-allocate.

Learn The Basics

It has been said that risk is in the investor, not the investment. In other words, investing risk is in not knowing what you are doing.

The best way to minimize this risk is to learn as much as possible about how to properly invest your money.

How do you get started?

How To Manage Money Like A Pro

First thing I recommend doing is picking which types of investments to learn about. If having an interest in learning how to pick great companies at a fair price, there are a ton of books on the market to learn how to identify companies to invest in and how to analyze financial statements. Not only are there books, but blog sites, podcasts, and YouTube channels dedicated to improving your financial knowledge.

Among some of my favorites: Motley Fool, Rule 1 Investing, Hamish Hodder, M1 Finance, and of course the godfather of value investing, Warren Buffet.

Another great investment to learn about is real estate. There is a ton to learn about investing in physical real estate such as how to find a good property, what is a good value, how to analyze a deal, how to negotiate a deal and much more.

Like stock market investing, there are a ton of books, blog sites, online communities, and podcasts dedicated to learning how to invest in physical real estate.

Among some of my favorites are Robert Kiyosaki podcasts, Bigger Pockets, and Roofstock.

Another investment that has become very popular is cryptocurrency. I’ll admit I have not had much time to investigate this investment. From my brief experience, it seems highly speculative and risky.

As I am learning more about it though I have heard there are ways to generate cashflow quickly at low risk in order to recoup the initial investment. As I learn more, I’ll pass it onto you.

In the meantime, here are a couple of places I have been using to learn more about cryptocurrency: Token Metrics and Wealth Factory. They offer articles, services, and even classes on cryptocurrency. It’s worth checking out.

Do Your Research and Practice

As with anything in life, you can only get better at it by practice. You practice, learn from the mistakes made, and practice some more. Rinse and repeat until mastery is achieved.

Before putting your hard-earned money on the line, the wise thing to do is find ways to practice and refine your skills without risking everything.

When you learned the basics, make sure to do your research before diving in. Understand how money can be made, the risks involved, how to mitigate the risks, and how to recoup your money back as quickly as possible.

For stocks, a good way to test your skills is to pick a stock you think is a great company and currently on sale and buy just 1 stock. Then, follow this stock for a year or so to see how it performs. This way you only risk a small amount of money while perfecting your skills.

Another way of practicing stock evaluation skills is using what Phil Towns calls back testing. Phil has tools on his site, Rule 1 Investing, that a person can use to pick a stock, analyze it, and test the performance without risking any capital. Good tools to use and practice with!

Another way to research and practice is to get a mentor. For example, if interested in learning how to evaluate a real estate property, find a mentor to guide you. In fact, your mentor can even be a business partner. Imagine working business deals with an experienced partner not only guiding you but also investing right alongside you.

Bigger Pockets also offers a wealth of tools and links to services that not only ease the burden of analyzing a property, but also find people to support you such as legal services for creating lease agreements, property management, and even tenant screening.

What’s In Store For Next Time?

We’ll finish our discussion on how to manage your portfolio like a pro and what to do if struggling to get started.

Until next time…..

Live The Life You Love, Want, and Deserve 😊


Did you like what you read about today? Do you have ideas for future blog posts? I’d love to hear your comments.