http://profitableinvestingtips.com/stock-investing/designing-an-investment-portfolio Designing an Investment Portfolio Designing an investment portfolio may be the most important thing you do in investing. There are tips and insights to make you money but over the long haul profitable investing hinges on hedging investment risk as well as picking winners. Here are a few insights into designing an investment portfolio. Matching Portfolio Risk to the Investor We have often noted that as an investor ages he or she will commonly want to move to dividend stocks instead of riskier investment. Business Insider gives an example of analyzing the portfolio of a retiree for risk. What’s one trademark of a poorly designed investment portfolio? The answer is a portfolio whose risk character is incompatible with the risk character of its owner. Frequently, these risk incompatibilities are camouflaged by a hot stock market. But when the market reverses and begins to fall like it has lately, the problems of investment portfolios with unsuitable risk levels becomes apparent. Factors to consider are cost, diversification, risk, tax efficiency and long term performance. You may be invested in a fund that pays good returns but those returns are largely eaten up by fees and commissions. If you were invested heavily in big oil you lost heavily when the price of oil fell. Diversification across various market sectors is good. Tax free or tax advantaged investments are good if you are still in your earning years but less important as you retire. Risk and long term performance are closely related. As the author says when the market is hot all stocks look good but when it falls only strong companies hold their value. If you would like to sleep well at night load up on long term strong performers. Unexpected Outcomes Sometimes strategies for designing an investment portfolio do not work out as expected. The New York Times writes about investment strategies mean to lessen volatility and how they may not have worked as expected.

1. By www.ProfitableInvestingTips.com

2. Designing an investment portfolio
may be the most important thing you
do in investing.

3. There are tips and insights to make
you money but over the long haul
profitable investing hinges on
hedging investment risk as well as
picking winners.

4. Before We Continue…
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5. Here are a few insights into
designing an investment portfolio.

6. Matching Portfolio Risk to the
Investor

7. We have often noted that as an
investor ages he or she will
commonly want to move
to dividend stocks instead of riskier
investment.

8. Business Insider gives an example of
analyzing the portfolio of a
retiree for risk.

9. What’s one trademark of a poorly
designed investment portfolio?

10. The answer is a portfolio whose risk
character is incompatible with the risk
character of its owner.

11. Frequently, these risk incompatibilities
are camouflaged by a hot stock market.

12. But when the market reverses and begins
to fall like it has lately, the problems of
investment portfolios with unsuitable
risk levels becomes apparent.

13. Factors to consider are cost,
diversification, risk, tax efficiency
and long term performance.

14. You may be invested in a fund that
pays good returns but those returns
are largely eaten up by fees and
commissions.

15. If you were invested heavily in big
oil you lost heavily when the price of
oil fell.

16. Diversification across various market
sectors is good.

17. Tax free or tax advantaged
investments are good if you are still
in your earning years but less
important as you retire.

18. Risk and long term performance are
closely related.

19. As the author says when the market
is hot all stocks look good but when
it falls only strong companies hold
their value.

20. If you would like to sleep well at
night load up on long term strong
performers.

21. Unexpected Outcomes

22. Sometimes strategies for designing
an investment portfolio do not work
out as expected.

23. The New York Times writes
about investment strategies mean to
lessen volatility and how they may
not have worked as expected.

24. On Wall Street, a cure is proving to be
nearly as bad as the disease.

25. [s]ome experts warn that the sums that
have flowed into so-called risk-parity
funds and exchange-traded funds, or
E.T.F.s, over the last five years have
become so large that the end result has
been a riskier, more volatile market.

26. Analysts estimate that there is currently
around $4 trillion tied up in these
investment strategies.

27. The fear is that as their returns continue
to suffer, a wave of investor selling will
start a wider market rout as managers
struggle to unload high-yield, high-
return bonds and equities alike.

28. Perhaps the most famous investor in
the world, Warren Buffett, says that
before he invests he must
understand how a company makes
its money and how it will continue to
do so over the years.

29. Buffett generally waits until a
household name stock is depressed
and buys it.

30. Buffett is the third wealthiest man in
the world with assets of about $63.2
billion.

31. When designing an investment
portfolio think about what the Oracle
of Omaha would do.

32. Blood in the Streets

33. Buying solid stocks when the market
is down is a time honored strategy
for designing an investment
portfolio.

34. Market Watch quotes two veteran
investors who say that now is
the time to buy stocks.

35. The idea being that when everyone is
confused about a volatile market
there are great deals to be had.

36. The stock market should be given the
benefit of the doubt, according to two
investment veterans with at least 50
years of experience each.

37. I’m referring to Sam Eisenstadt, the
former research director at Value Line,
and Norman Fosback, the former
president of the Institute for
Econometric Research and, more
recently, editor of Fosback’s Fund
Forecaster.

38. Eisenstadt has been rigorously following
the stock market for more than seven
decades; Fosback has been a student of
the market for “only” five decades.

39. To be sure, Eisenstadt is more bullish
than Fosback is.

40. But even he is focusing more on finding
bargains than on building up cash.

41. When designing an investment
portfolio be on the looking for strong
stocks that are selling on the cheap.