Design your own Investment Portfolio
Using the Investment Temple & SMART investing methodologies

By now you would have explored the Tools & Supplies section, how & why to pay yourself first, the background basics on the Investment Temple, and perhaps read about a myth or two.  Now we’re ready to start putting into practice what you’ve learned.

Before we go step by step in design & constructing your own personal investment temple, I think it would be helpful to summarize the principle themes that I have introduced & discussed on this website.  And I’m going to make it easy to remember the core concepts presented on New Investor Tool Kit.  Just think “SMART” investing.

  • S:  stocks are the best long-term wealth creation vehicle ever created by mankind.  DRIPs are an improved way to buy individual stocks due to lower cost and partial share ownership permitted; particularly for small investors.  And make sure you choose the bluest of blue chip stocks for your DRIPs.
  • M:  manage this stuff yourself!  In other words, aim to pay little or no fees for professional management on your money.  As we have seen, fees destroy the amazing power of compounding and you will easily pay 50% in returns to mutual fund managers who are, most likely, underperforming the general stock market while taking no personal risk themselves.  That's a pretty good deal for them.  But a really bad one for you.
  • A: automate your investments monthly or quarterly or annually.  Do this by setting up a separate bank account to pay yourself first
  • R:  reinvest those dividends - remember, you may want dividend income when you are retired.  But when you are amassing wealth, the 'fire & forget' approach works best.
  • T:  time.  You need time – oodles of it – to amass large amount of wealth via regular, disciplined and automated investing in stocks.

One last point to make that is entirely consistent with both SMART investing and building and maintaining your own Investment Temple.  Ownership.   This is your wealth building activity.  Own it. Because, ultimately, you are the one that will have to live with the results.

Ready?  Good, let's go!

There are three principle decisions you’ll need to make in the temple design phase.  And whereas you are to apply the SMART criteria to the foundation, columns and roof of your temple, in effect you already start with S, R & T completed, as these are the bedrock assumptions in the Investment Temple approach (namely, Stocks, Reinvest & Time).  

So you need to tack on M and A, not necessarily in that order, as you’ll see below:

  1. How much to invest?  Decide how much investable cash you can ‘find’ to invest every month or every quarter.  Remember, the whole objective here is to ‘pay yourself first’ so that you don’t even see this money in your normal bank/checking account.  Set up another account and automatically transfer your decided amount once you get a paycheck or other inflow of cash.  Congrats, you've just added the “A” in SMART
  2. How to invest?  Decide which type of investor you are:  Fire & Forget, Occasional Glancer or Hobbyist (for a refresher on the types, click on the names).  Essentially the key determining factors should be how much you like investing and how much time you want to commit to this activitiy.  This choice will drive only slight differences in my recommended approach. And now we have the “M”, completing the spelling of SMART.
  3. Where to invest?  Decide your intended portfolio allocation (i.e., asset allocation) of your investment capital.  This third step is a function of steps 1 & 2 above; namely, how much investable cash do you want to devote to your long-term wealth creating activity and how much time you are willing (and interested) to commit.

The below matrix can act as a guide for you, but use your own judgment and other ‘gut’ feelings to modify, tweak and/or adjust.

A few comments to accommodate the investor matrix above:

  • You will notice a priority towards DRIP investments.  As I’ve made abundantly clear in the DRIP section, I believe DRIPs are the most cost-effective, compounding return-enabled investment products available to the individual investor.
  • Multiple DRIPs will begin to provide some level of diversification
  • Adding in an ETF for larger accounts provides excellent, comprehensive portfolio diversification.
  • A commodity account (i.e., gold & silver) is up investor preference; but, I believe, it prudent to allocate a small percentage per month to this value preserving asset class.
  • The stock account for the Hobbyist who can devote more than $500 / month in investment capital allows for active trading of stocks, in addition to the core account of DRIPs plus an ETF or two.

So then the next natural question is, how to allocate the actual money amongst these asset classes?  A range of suggestions per investor type is included below.  Again, use your judgment as this it your money.  However, these below allocations have served me well in the past as I have slowly increased my monthly investing from very small to incremental larger amounts over time:

A few comments to accommodate the investor matrix allocations above:

  • As mentioned, these allocations have worked for me as I, personally, progressed from the fire-and-forget to hobbyist investor.
  • I do commit monthly amounts to gold & silver investing as a hedge against paper currency devaluation and as an insurance product against market/country turmoil in general.
  • The stock account is an option for the hobbyist but beware for the uber-hobbyist – make sure you adhere to your monthly allocation because you may be prone to slide down that slippery slope of ‘DRIPs are boring so I’ll put more of my investable cash in the stock account and make a killing!’.  Remember, very, very few of us can consistently beat the market (I’m certainly not one of them either).  But what I have found is that I can do very well, relative to the general stock market, if I stick to my chosen professional field (energy).  More times than not, I can outperform the general market with energy investments as I have a very good understanding of what drives value.  You, too, may have an ‘insiders’ view on the sector where you work that enables you to make above-average educated investments.  But I caution you, this is your retirement nest egg so it is best to put strict controls on how much you allocate to this active trading account.
  • The stock account is also where the more sophisticated investors can create the Exotics column.  Sometime in the future I may add some ideas to the Top Tips section to better demonstrate this potential.

If you have followed the methodology up to this point, you are now ready to put it into actual practice.  Take a deep breath (and a bow) and press here to continue.

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