It’s gift giving season, but let’s be real…
It is also the season of requests. Fill this wish list with all the gifts you’ve wanted all year but haven’t yet pulled the trigger. These items can include small stocking stuffers that you find on Etsy as well as larger gifts such as a new Apple Watch or iPad. Sure, the more expensive items might get all the glory, but it’s the little things that really add up to the whole Christmas morning experience when opening presents with your loved ones.
And without a better transition in mind, let’s see how building your vacation wish list can be similar to building an investment portfolio.
After all, what could be more festive and joyful than drawing up a complex financial plan?
Just about anything. So let’s simplify things a bit and show how to have a varied wishlist with top gifts like iPads with Stocking stuffers makes for a better experience than having all of one or the other.
It’s time for the Stockmas Wishlist 2022.
meat and potatoes
As nice as small gifts are, the most attention is paid to the giant box in front of the Christmas tree. The present you are most looking forward to opening and which will probably be the most useful or at least the one you will spend the most time with. The box can be literally big and hold a bike or it can be financially significant and end up being the newest and most powerful smartphone.
Similarly, an investment portfolio will have a large portion of its assets built towards a specific goal and is usually comprised of blue chip stocks. Investors looking for greater growth potential might have a higher allocation to tech stocks, while income-focused traders might have higher-dividend stocks in the financial or energy sector. Stocks change depending on the target, but the meat and potatoes in the portfolio often remain strong with strong market share.
Investors should seek to reap the benefits of diversification to minimize risk. So growth-oriented merchants don’t have all their money in Apple (AAPL) but also some from Nvidia (NVDA), Amazon (AMZN), Oracle (ORCL), Nike (NKE), and others so that a bad company or even a bad industry does not bring down the whole portfolio. Meanwhile, income investors could split their assets between JPMorgan (JPM), Johnson & Johnson (JNJ), Exxon (XOM) and Coca-Cola (KO) among many others. These investments may not be the most exciting or the riskiest, but they are the building blocks of any portfolio and should be companies you believe in and have a proven track record.
Medium size packages
Okay, big gifts are catered for, but that doesn’t mean we go all the way to smaller gifts. The king size candy bar has been opened but it’s not quite time for Reese’s Pieces yet.
After the blue chippers have laid the foundation of the stock portfolio, the mid-cap investments come next, which are slightly smaller companies that have grown and offer more growth opportunities but carry more risk. For growth investors which could include companies such as Salesforce (RCMP), Micron Technology (MU), Chipotle (GCM), and Airbnb (ABNB). Meanwhile, higher-dividend stocks in this category include REITs such as Prologis (PLD) and Crown Castle (ICC) as well as other income stocks, including Altria Group (MO), Unilever (UL), Morgan Stanley (MRS) and enterprise products (DEP). These stocks are slightly smaller than the big blue chip stocks, but are still very large companies that have significant market share in their respective sectors, but are looking to expand further or return more of their profits to the investors.
Prank time!
Well, finally, down to Reese’s Pieces with investments that can range from decently risky but with strong bullish signals to purely speculative gambling for fun.
Cryptocurrency falls somewhere on that scale depending on the investor, but should probably remain a smaller part of your portfolio given its extremely risky nature, no matter how far you think Bitcoin and Ethereum are going. moon. Additionally, any investment in a special purpose acquisition company (SPAC) should be limited to a small subsection of an entire portfolio depending on the nature of such “companies”.
Now might be a good time to remember that this is a Stockmas wishlist on how to build a varied portfolio and is not investment advice for those who are looking to fully invest their Christmas bonus in a random EV manufacturer or crypto project. For those who have this plan, I hope it works but this article is not for you.
Anyway, back to small investments.
Whether it’s crypto, SPAC or electric vehicles, this part of the portfolio targets the riskiest investments that you believe present serious growth opportunities. Sure, you can pick a random penny stock and have fun with it, but you might also notice a growing technology company that offers a unique product or service and choose to bet on that company with a small portion of your total assets. . This smaller section should be for more fun and risky investments, but that doesn’t mean they’re completely random and risky just for fun.
Wrap
At the end of the day, giving presents under the tree is a fun experience, but it shouldn’t be taken too seriously. It’s corny, but the holiday season isn’t just about gifts, it’s about who you open them with. An investment portfolio may seem like an extremely daunting and serious task, but it doesn’t have to be. Developing a financial plan is important, but it doesn’t require constantly checking a Bloomberg terminal. The financial plan is not about the exact allocation of investments, but about the destination and use of the money. So have a plan in place, but make sure it doesn’t get in the way of what matters. Happy Holidays!
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