Some tips on portfolio management for investment clubs.

1. Doug’s Portfolio Clinic
Best Practices:
Club Portfolio
Management
by Doug Gerlach
ICLUBcentral Inc.
April 2010
© Copyright 2006. ICLUBcentral Inc.
Doug’s
Rules for a
Healthy
Club
Portfolio
© Copyright 2006. ICLUBcentral Inc.
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2. Doug’s Portfolio Clinic
Goals of Portfolio Management
1.Reduce
1. Reduce Risk
2.Increase
2. Increase Returns
1. Diversify by Sector & Industry
• Spread out holdings into many industries
– Beware focusing too heavily on retail,
consumer goods, restaurants, healthcare
• Avoid sector concentration
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3. Doug’s Portfolio Clinic
2. Diversify by Company Size
3. Don’t Own Too Many Stocks
• Traditional rule: 10-12 stocks offer good
10-
diversification
• New research: 15-20 stocks provides
15-
better benefits
• In a club: own no more companies than
members can follow effectively
– Such as 1 per member
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4. Doug’s Portfolio Clinic
4. Don’t Fear Selling
• Review stocks after each quarterly EPS
announcement
• Replace (not “sell”) stocks with limited
upside potential or problematic concerns
– Over-valued stocks are as a big a risk to your
Over-
portfolio as under-performing stocks
under-
• Upgrade your portfolio often!
5. Don’t Get Dragged Down by Fees
• Commissions & costs should be less than
2% per purchase
– and ideally closer to 1%
– Otherwise, fees eat excessively into your
returns
• Larger investments also force you to
concentrate your energy into finding
absolute best candidates
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5. Doug’s Portfolio Clinic
6. Be Tax-Smart
Tax-
• In club, transfer highly-appreciated
highly-
shares to fully-withdrawing partners
fully-
– Delay recognition of embedded capital gains
until each subsequent partner withdraws
from club (could be years!)
• Never forget tax impact of portfolio
decisions
– Just don’t be governed by them!
7. Portfolio Goals are Moving Targets
• There is no such thing as a “perfect”
portfolio.
• Your club portfolio is always changing,
always requiring adjustments.
• Consider these as “guidelines,” not hard
and fast “rules.”
• But beware of consequences if you break
the rules!
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6. Doug’s Portfolio Clinic
For More Information
• ICLUBcentral
www.iclub.com
• Write me
gerlach@iclub.com
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