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So, what are some great stock portfolio examples?
Also, which stock portfolio best suits you?
Finally, how do you actually implement these portfolio strategies for your own investment?
Different Types Of Stock Portfolio Examples
So, what are the different types of stock portfolio examples?
Depending on how you want to categorize them, you will have different answers.
If you categorize them by risk tolerance, then you will see these three different types of stock portfolio examples:
- Aggressive stock portfolio (i.e. high risk)
- Moderate stock portfolio (i.e. moderate risk)
- Conservative stock portfolio (i.e. low risk)
As you have probably known, stocks are generally riskier than bonds.
So, by adjusting the asset allocation for stocks and bonds, you can build an investment portfolio with your preferred risk level.
For example, for an aggressive stock portfolio, you would have a much larger percentage of your portfolio invested in stocks and a very small percentage invested in bonds. (e.g. 90% in stocks and 10% in bonds)
On the other hand, for a very conservative stock portfolio, you would have a larger percentage of your portfolio invested in bonds and a smaller percentage invested in stocks. (e.g. 60% in bonds and 40% in stocks)
However, the problem with this is that it still leaves you with a lot of questions.
For example, exactly what kind of stocks do you buy for your stock portfolio?
How many stocks should you buy?
And how much should you invest in each of these stocks?
Lastly, how do you actually find these stocks?
Now, this brings us to a different categorization of stock portfolio examples.
If you categorize them by investing strategy, then you will have these common types of stock portfolio examples:
- Growth stock portfolio
- Dividend stock portfolio
- Value stock portfolio
- Passive investing stock portfolio (i.e. buying stock ETFs, mutual funds, or target funds)
Growth Stock Portfolio Example
First of all, what are growth stocks?
A growth stock is a stock that generates substantial and sustainable positive cash flow and its earnings are expected to increase at a faster-than-average rate.
So, what does this mean?
As you know, stock prices are a direct reflection of the expected future earnings of a company.
With a higher-than-average growth rate, growth stocks usually give you higher-than-average returns.
Having said that, the risks associated with investing in growth stocks are also higher.
So, how do you find good growth stocks?
Personally, I subscribe to David Gardner’s Rule Breakers which is specifically focused on identifying high growth stocks.
Inside Stock Rover, you can use its stock screener to filter out good growth stocks.
There are over 500 financial and fundamental metrics for you to choose from.
Below is a list of metrics that fall under the “growth” category that you can mix and match to customize your stock screener:
There are also built-in growth stock screeners such as “Stock Rover Growth Ratings” that you can use right away to find growth stocks.
Below is a list of growth stocks you will find by using this stock screener:
Now, what is a good growth stock portfolio example?
First of all, for growth stocks, you can group them by market capitalization (large-cap, mid-cap, and small-cap).
Generally, large-cap growth stocks are less volatile than both mid-cap and small-cap growth stocks, but mid-cap and small-cap growth stocks have more room for future growth (i.e. greater potential for future price appreciation)
If you want to build a moderate growth stock portfolio, then a possible asset allocation would be 70% in large-cap US growth stocks, 20% in mid-cap US growth stocks, and 10% in small-cap US growth stocks.
Of course, you can also include growth stocks from emerging markets such as China and India.
Emerging markets generally have more growth potential than developed countries like the US, but they might be more volatile.
Below is a growth stock portfolio example:
|Growth Stock||Percentage of Growth Stock Portfolio|
|Installed Building Products||5%|
|Sabra Healthcare REIT||5%|
Dividend Stock Portfolio Example
Dividend stock portfolios are ideal for investors who are looking for consistent income.
When you receive your dividends, you can choose to either reinvest them back into your stock portfolio or you can use them to supplement your existing income.
Personally, I would recommend that you reinvest your dividends to take advantage of the power of compounding to grow your money.
Now, how do you find high-quality high-dividend stocks?
I simply created a stock screener(see below) to filter out all the stocks with dividend growths for the past 10 years.
You can also customize your own stock screener using the over 500 different financial metrics in Stock Rover.
Below is a list of dividend stocks that I found using “Stock Rover“‘s stock screener.
There are about 80 dividend stocks that met my investment criteria.
To further narrow the list, you can use metrics such as dividend yield, valuation, financial health grade, profitability, and Stock Rover ratings.
Dividend Yield is always expressed in percentage which indicates how much a company pays out in dividends each year relative to its stock price.
It is similar to the interest rate you earn on your fixed deposit.
So, what is a good dividend stock portfolio?
If you are buying ALL individual dividend stocks, then a total of at least 10 to 15 stocks would be good to diversify your stock portfolio.
When you choose the individual dividend stocks for your portfolio, you should ideally have high-quality dividend stocks from all these three sectors:
- Defensive Sectors (e.g. Consumer Defensive, Healthcare, and Utilities)
- Cyclical sectors (e.g. Basic Materials, Consumer Cyclical, Financial Services,
and Real Estate)
- Sensitive sectors (e.g. Communication Services, Energy, Industrials, and Technology)
This way, you are diversified enough to protect your portfolio against economic recession.
A conservative dividend stock portfolio example would look like this.
|Dividend Stock||Percentage of Dividend Stock Portfolio|
|Colgate & Palmolive||5%|
|Johnson & Johnson||5%|
|Northwest Natural Gas||5%|
This stock portfolio consists of mostly large-cap dividend stocks with a long history of dividend payouts.
These dividend stocks also come from a diverse group of industries, further reducing your investment risks.
On the other hand, if you are not free to do research and pick dividend stocks yourself, then investing in dividend stock ETFs would be a good alternative.
We will talk about this in greater detail in the passive investing stock portfolio example.
Value Stock Portfolio Example
When you talk about value stock portfolio examples, the first person that comes to your mind is probably Warren Buffet.
First of all, what is a value stock?
“A value stock is a stock with a stock price that appears low relative to the company’s financial performance, as measured by such fundamentals as the company’s revenue, dividends, yield, earnings, and profit margins.”
Now, let’s take a look at Warren Buffet’s Stock Portfolio that you can easily access from “Stock Rover“.
As you can see from the table below, Warren Buffet’s Stock Portfolio has around 25 stocks, with close to 50% of his portfolio invested in technology stocks, 30% in financial services stocks, about 15% in consumer defensive stocks and other sectors, and 5% in other sectors.
For Warren Buffet’s stock portfolio, its investments are highly concentrated in technology and financial services stocks. (i.e. about 80%)
So, you might be wondering why Warren Buffet is not building a more diversified and balanced stock portfolio?
First of all, what portfolio diversification does is that it reduces volatility.
In other words, it reduces your investment risks and smoothes out your investment returns.
BUT, it does NOT help with your investment returns.
That’s why legendary investors like Warren Buffet can achieve their above-average returns by building a more concentrated stock portfolio.
Having said that, if you are just a beginner investor, the smart thing to do with your hard-earned money is to build a diversified stock portfolio by investing in index ETFs such as S&P500 ETFs.
Passive Investing Stock Portfolio Example
If you prefer a hands-off investment approach, then passive investing would be perfect for you.
So, what is passive investing?
Passive investing basically means putting your money in ETFs, mutual funds, or target funds.
When it comes to choosing which ETFs to invest in, you have to consider the following factors:
- ETF Category (i.e. stock ETF or bond ETF?)
- Equity ETF Style (i.e. Large-cap value or small-cap growth?)
- Equity ETF Region Breakdown (i.e. 100% US stocks? or 50% US, 30% Asia and 20% Eurozone?)
- Equity ETF Sector Weighting (i.e. 50% Technology, 15% consumer defensive, 15% financial service, 15% healthcare, 5% others)
- ETF expense ratio
First of all, do you want to invest in an equity ETF or bond ETF?
Depending on your risk tolerance level as well as your asset allocation preference, you can choose a combination of different ETFs.
For example, if you are comfortable with taking a bit of risk, you might prefer a lower percentage of your portfolio allocated to bond ETFs (e.g. 30%) and a higher percentage to equity ETFs (e.g. 70%).
Now, what kind of equity ETFs do you want to invest in?
Equity ETFs only invested in large-cap value US stocks?
Or equity ETFs invested in both large-cap value and growth stocks in the US?
Or equity ETF only invested in emerging markets large-cap value stocks?
So, if you want exposure to emerging markets such as Asia, then you can allocate a certain percentage of your portfolio to ETFs that specifically invest in Asia.
Next, you should always choose ETFs with a very low expense ratio.
Preferably, it should be as low as possible.
Because a high expense ratio will significantly reduce your investment returns over the long term.
Below is an illustration of how the ongoing fees that funds charge affect your portfolio value, according to SEC.
For a $100,000 portfolio, the total fees paid over a period of 20 years add up to almost $28,000.
That’s almost 30% of your initial investment, all gone to the pockets of fund management companies.
So, when you choose ETFs, it is wise to go with ETFs with minimal fees.
Now, let’s look at a passive investing stock portfolio example.
Let’s say that I want a stock portfolio with 50% invested in US dividend stocks, 15% US growth stocks, 20% Emerging Markets, and 15% US bond ETF.
As most fundamentally strong large-cap value stocks pay dividends, that’s how I am going to use Stock Rover to find equity ETFs that meet my criteria.
Here’s a list of my ETF filtering criteria for ETFs that invests in dividend stocks:
- US Equity
- % invested in large-cap value stock > 30%
- Expense ratio <0.30%
As a result, you would get slightly over 70 ETFs that meet these criteria.
Out of these 70 ETFs, you can sort them based on Morningstar ratings.
Now, a moderate passive investing equity ETF portfolio example would look like this.
|Equity ETF||Percentage In Stock Portfolio|
|Schwab US Dividend Equity ETF||50%|
|Vanguard FTSE Emerging Markets Index Fund ETF||20%|
|iShare Russell 2500 ETF||15%|
|Vanguard Total Market Bond Fund||15%|