Designing The Appropriate Common Stock Retirement Portfolio: Stock Selection Options: Part 2


This article is a refresh and an update of an article I originally posted in 2015. However, the principles I am presenting are timeless and worthy of being revisited. Moreover, I have updated the supporting examples to more precisely reflect our current market environment.

In part 1 of this series I discussed two important principles. Number 1: be realistic with your yield objective. Number 2: determine how much income your portfolio needs to produce. The central ideas were that in order to be prudent, you should be cognizant and realistic about what the current market environment is offering. And next, your specific objective should be to prudently and conservatively satisfy your own personal needs. I find this a superior approach to simply trying to beat the market or even trying to make the most money you can.

Consistent with this perspective is the importance of having a plan and then exercising the discipline to follow that plan. As the venerable Yogi Berra once said, “if you don’t know where you’re going, how are you going to know when you get there.” So, to answer the question that I am often asked: what is the best way to design or construct a common stock portfolio for retirement? My short answer is always the same – it depends. Because, the truth is, there is no perfect method or strategy for designing a stock portfolio that is right for every individual investor. However, there are principles of sound investing that every investor can follow and apply when designing a common stock portfolio that’s just right for them.

Furthermore, there are general categories that individual investors fall into. Some individuals are young and planning for retirement while other individuals are closer to retirement, and there are some that are already retired. Additionally, each individual investor has different levels of financial resources that specifically apply. To complicate the process even more, individual investors of all types possess unique goals, needs, objectives and risk tolerances. Therefore, the logical secret to designing a successful common stock portfolio is to design one that’s most appropriate for you.

Therefore, the objective of this series of articles is not to attempt to dictate how individuals should design their own stock portfolios. Instead, the objective of this series is to provide information regarding common stock investing strategies and options that everyone can evaluate and ultimately utilize so they can implement and construct a common stock portfolio that’s just right for them.