Chapter 07 · Intermediate · 7 min read
Build Your Portfolio
Your portfolio is a team, not random players
Give every investment a role and avoid accidental overlap.
Think like a football manager
You would not put eleven strikers on the pitch simply because scoring is exciting. Asset allocation decides how much belongs in shares, bonds, cash and other investments based on your goals, timeframe and tolerance for loss.
A core can provide a broad diversified foundation. Smaller satellites can express specific convictions such as emerging markets, small companies or technology.
Overlap and rebalancing
A global Exchange-traded fund — a basket of investments you can buy and sell like a single share., S&P 500 ETF, Nasdaq ETF and AI ETF may all lean heavily on the same companies. More funds do not guarantee more Spreading money across many investments so one bad outcome hurts less..
Nudging your investment mix back to the split you originally chose. means returning the portfolio to its intended allocation after markets move. The portfolio should fit your life, not an influencer's screenshot.
Words worth knowing
Open dictionary- Asset allocation
- How a portfolio is divided among asset types.
- Core
- The broad foundation of a portfolio.
- Rebalancing
- Returning holdings to their intended weights.
What is the purpose of rebalancing?
Try it yourself
Create a hypothetical €10,000 portfolio and write one sentence explaining the role of each holding.
Can you spot it?
A portfolio has five funds, but all five have the same top three companies. What risk is hiding in plain sight?