The Retirement Dividend Growth Portfolio Concentrated Or Diversified: Part 3


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.

Designing the common stock portion of your retirement portfolio is very challenging. For starters, there is not a perfect or even best way to design a stock portfolio. However, there are many effective strategies that have produced successful long-term results. The key to success is to find and implement the strategy that best fits your own unique goals, objectives, needs, and most importantly – risk tolerances. More to the point, don’t let anyone try to dictate what you should do. Instead, if you are using a professional advisor, you dictate to them what you want and need and most importantly would be comfortable with.

Common Stock Portfolio Design

This article is dealing with designing the common stock portion of your retirement portfolio. For some retired investors, this may be the whole portfolio. For others, they might want or feel more comfortable with some liquid cash assets, fixed income, etc. Nevertheless, this article is only dealing with the common stock portion.

There are many aspects associated with designing a common stock portfolio that need to be considered. The number of individual companies to include in your portfolio is a big one. In addition to the number of companies, how much weight you should put in each one. Should they be equally weighted? In other words, when constructing the portfolio should you put the exact same percentage of your portfolio in each company? Or, does it make more sense to overweight some and underweight others? Moreover, should you own stocks from every sector or just the sectors you like the best?

These are just a few of the important questions that investors must grapple with when designing a common stock portfolio. But most importantly, and I repeat myself, there is no absolute or perfect strategy for constructing a stock portfolio that fits every individual investor. On the other hand, there are important considerations that every individual investor would be well-advised to contemplate. Ultimately, it comes down to designing a stock portfolio that suits you.

Therefore, my objective with this article is to provide some food for thought and common stock portfolio design ideas that I hope can help individual investors make better choices that fit and meet their own needs. I am a big proponent of applying logic and common sense to the investing process. Consequently, rather than just giving specific portfolio construction strategies, I also intend to offer some logical ways to look at common stock portfolio construction.