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How to Build an Investment Portfolio
1. Finding Your Way Through the Maze
of Investing
How To Build Your Portfolio:
Insights into Amway RSP Stock Funds
2. How To Build Your Portfolio
Our goal is to provide you
with an understanding of
how to manage portfolio
risks โ the most important
aspect of an effective
portfolio.
3. How To Build Your Portfolio
Portfolio:
a collection of investments
held by an institution or a
Mutual
private individual Fund C
Mutual
Fund B
Mutual
Fund A
4. How To Build Your Portfolio
โข RISK: the potential that a chosen action or
activity (including the choice of inaction) will
lead to a loss (an undesirable outcome).
5. How To Build Your Portfolio
โข RISK: the potential that a chosen action or
activity (including the choice of inaction) will
lead to a loss (an undesirable outcome).
โ All investments are risky
โ Combining different investments can increase or
decrease overall risk
โ You cannot manage returns; you CAN manage
risk
6. How To Build Your Portfolio
Correlation: The measure of how two securities
move in relation to each other.
0
-1 Negative Positive +1
7. How To Build Your Portfolio
Correlation:
The measure of how
two securities move
in relation to each
other.
8. How To Build Your Portfolio
Asset Class: Asset Classes
A group of securities that exhibit
similar characteristics, behave
similarly in the marketplace, and
are subject to the same laws and
Cash Stocks
regulations.
โข Stocks
โข Bonds
Bonds
โข Cash
9. How To Build Your Portfolio
Asset Classes
โข Asset Allocation across
the asset classes will
reduce positive
correlation Cash Stocks
Bonds
10. How To Build Your Portfolio
โข Systematic Risk
โ Market Risk
โ Cannot be eliminated
โ Eg. Recession, war, elections
โข Unsystematic Risk
โ Specific risk
โ Can be reduced/eliminated
โ Eg. Worker
strike, bankruptcy, supply
chain interruption
11. How to Build Your Portfolio
Asset Classes have Categories
โข Stocks
โ Domestic
โข Large Cap Domestic
Intl Stocks
Stocks
โข Mid Cap
Cash
โข Small Cap
โ International Chocolate
US
โข Large Cap Treasury
Corp Bonds
โข Emerging Nations Bonds
โข Bonds
โ US Treasury Bonds other
โข 10 year
โข 30 year
โข TIPS Diversification:
โ US Corporate Bonds Mix a variety of investments across the Asset
โข Investment Grade Class Categories to eliminate unsystematic risk
โข High Yield
โ International Bonds
14. How To Build Your Portfolio
Value Blend Growth
Spartan 500 Mainstay
Large Cap Alps/WMC
Vanguard T Rowe Price
Health Care New Era
Vanguard Mid
Morgan
Cap Index
Hotchkis & Stanley
Mid Cap Wiley
American
Century Real
Baron Growth
Estate
Vanguard Neuberger
Small Cap Berman
Small Cap Index Genesis
15. How To Build Your Portfolio
Portfolio
construction:
Methods
โข At one extreme is
the
โreturns chaserโ
16. How To Build Your Portfolio
โข At other extreme is the
professional investment
manager
17. How To Build Your Portfolio
โข Your method should be in-between
18. How To Build Your Portfolio
โข Create and follow a Asset Classes
personal asset allocation
policy
โข eg.
โ Stocks : 45-65% Cash Stocks
โ Bonds : 30-50%
โ Cash : 5-15%
Bonds
19. How To Build Your Portfolio
โข Identify your personal risk profile: how
sensitive are you to losing money?
20% 60% 100%
Conservative
Aggressive
Moderate
https://personal.vanguard.com/us/FundsInvQuestionnaire
20. How To Build Your Portfolio
And decide how much risk you can accept for your assets
Conservative Investors Best Returns Worst Returns
(20% Stock)
One Month 4.29% One Month -4.91%
Three Months 6.73% Three Months -3.37%
One Year 13.85% One Year -3.06%
Moderate Investors Best Returns Worst Returns
(60% Stock)
One Month 8.24% One Month -13.63%
Three Months 14.23% Three Months -12.71%
One Year 27.18% One Year -24.75%
Aggressive Investors Best Returns Worst Returns
(100% Stock)
One Month 14.25% One Month -22.51%
Three Months 23.34% Three Months -24.05%
One Year 41.27% One Year -40.69%
21. How To Build Your Portfolio
โข Create and follow a Asset Classes
personal asset allocation
policy
โข Identify Asset Allocation
triggers (see Monitoring Cash Stocks
the Market seminar)
Bonds
22. How to Build Your Portfolio
โข Create and follow a
personal asset Domestic
Intl Stocks
allocation policy Stocks
Cash
โข Identify Asset US
Chocolate
Allocation triggers Corp
Treasury
Bonds
(see Monitoring the Bonds
Market seminar) other
โข Reduce Diversification:
unsystematic risk Mix a variety of investments across the Asset
Class Categories to eliminate unsystematic risk
through
diversification
23. How To Build Your Portfolio
Value Blend Growth
Spartan 500 Mainstay
70% Large Cap Alps/WMC
Vanguard
Health Care
T Rowe Price
New Era
Vanguard Mid
Morgan
Cap Index
Hotchkis & Stanley
20% Mid Cap Wiley
American
Century Real
Baron Growth
Estate
Vanguard Neuberger
10% Small Cap Small Cap
Index
Berman
Genesis
27. How To Build Your Portfolio
โข Summary
โ Match your personal risk preferences
โข Conservative, Moderate, Aggressive
โ Manage risk exposure by combination of investments
โข Asset Allocation
โข Diversification
โ Closet indexing โ investing the size and styles as they are
represented in market; mimicking the market
โ Know each fundโs risk and how it will effect the portfolio
โข Max & Min return swing
โ Monitor - Triggers for adjusting allocation
28. How To Build Your Portfolio
NEVER forget your focus!
โ Retirement is your end-
game
โข Retirement goals
โ Focus on longer term
โข Investment horizon
โ Stick with your Basic
Plan
โข An Investment Policy
Statement helps you
remember
29. Thank You
Schedule your personal consultation now!
Visit http://amway.bemanaged.com
Contact us at (616) 871-0751 or (888) 738-8780
Large Cap
Mid Cap
Small Cap
30.
31. How To Build Your Portfolio
Portfolio construction
โข Wait. Why a
portfolio? Why not
just 1 great fund?
32. How To Build Your Portfolio
Common sense tells us that your likelihood of experiencing
loss is greater if you are invested in just 1 fund.
33. How To Build Your Portfolio
Large Cap
Mid Cap
Small Cap