Portfolio Design

How to Design a Killer Portfolio

5 Modules 0 Chapters 20 Lessons Advanced

About this course

When it comes to designing your investment portfolio, Wall Street takes an assembly-line approach.

They profile you for age, risk tolerance, and income needs.

It’s a standard procedure, and a robot would probably do a better job at this part of the process.

Next, they put you in a category along with hundreds of other investors. The final step is to recommend a cookie-cutter portfolio that will probably fit you like an off-the-rack suit, without taking into consideration things like size, color, or fabric.

This course goes well beyond the cookie-cutter approach and shows you how to design a well-tailored portfolio that actually fits you.

Learn more

Course Structure

5 Lessons

Mindset: Getting your head straight

Investing at a high level can be simple, but it's never easy. Most of the heavy lifting is done up front, and after that it becomes a matter of following your plan through good markets and bad. That requires mental and emotional toughness, resolve, and discipline.

In this module I will describe the cognitive and emotional pitfalls that you will encounter on your journey. And I will offer strategies to deal with them. Whether you can stay calm and rational when the market is hostile and your account is taking on water is up to you.

I'll give you the tools, but I can't use them for you.

Self-Awareness

"If you don't know who you are, the stock market is an expensive place to find out." -Adam Smith, The Money Game

Almost all Master-level investors have developed acute self-awareness over time. It's a skill that few are born with but anyone with an average I.Q. can learn with a moderate amount of effort.

Self-awareness means having the courage to acknowledge your weaknesses and work on overcoming them, or at least taking them into consideration when making important investment decisions.

An investor who lacks self-awareness doesn't learn from his mistakes because he is unwilling to admit to himself that he has made one. He therefore repeats the same mistakes again and again, which leads to what Adam Smith called a very expensive education.

Situational Awareness

Combat troops learn to "keep your head on a swivel" because if they don't, they wont survive very long. 

Quarterbacks learn to scan the defense quickly and look for weaknesses to exploit. Those who don't have this skill are quickly replaced.

If you want to achieve master level as an investor you need to develop situational awareness. You have to pay attention to what's happening in the market and the economy. Otherwise you'll just be the sucker at the table.

Game Theory

In the movie "A beautiful Mind" John Nash (played by Russell Crowe) was a math genius who figured out the keys to game theory. 

In a nutshell, game theory says that it doesn't matter what the reality is when people are competing for a prize. It only matters what you think your opponents believe the reality is. If you can figure this out, you can anticipate your opponent's next move and outsmart them.

In the realm of investing, a solid grasp of game theory will take you far. It will enable you to play 3 dimensional chess while other investors are playing checkers.

Portfolio Theory

There's this thing in investing called Modern Portfolio Theory. And there's this other thing called The Efficient Market Frontier. You can relax, because we're not going to go there. These topics are too wonky and you don't need to know the details.

Instead, this course will take the most critical parts of these theories and present them to you in a way that's practical and useful, without having to spend hours talking about theoretical stuff.

Module 1 Quiz

This short quiz will tell you how much of the module content you have retained. The purpose is to let you know if you should review the material or move on to the next module.

5 Lessons

Building a solid foundation.

For a portfolio to be effective it must be built on a solid foundation. What’s a solid foundation? It’s a combination of your needs and decision making style, paired with asset classes that are relevant to what you are trying to accomplish. If you get this part right, you can eliminate the vast majority of investment products on offer in the marketplace and focus on a short, manageable list.

Asset Classes

The studies I've seen, and there are many, agree that the way assets are allocated in a portfolio has the largest impact on portfolio returns. That's what we will address in this lesson.

There are more than 40 recognized asset classes to choose from. That’s too many. This lesson will show you how to winnow down this list to just the ones that are relevant for what you are trying to accomplish.

How to tilt your portfolio

We have the building blocks, and now its time to choose which ones belong in your portfolio

Types of Securities

Once you have settled on a broad asset allocation foundation, it's time to choose among the thousands of investment vehicles that will represent each of your asset classes. That may sound like a daunting task, but you only have to do it once... right now. After that it will become a matter of making minor adjustments around the edges. 

Module 2 Quiz

Take this quiz and find out if you're ready to move on, or go back and review one or more of the lessons.

4 Lessons

Step by Step Portfolio Design

In this module we will take the choices you've made about asset allocation and investment vehicles and create a finished portfolio. 

Set up your asset allocation table

Now that we have our short list of asset classes it’s time to drill down into the specifics of which investment products will give you the most bang for your buck. At the end of this process we should have a list of 10 to 20 products for you to put on your shopping list. Only 5 to 10 of them will ultimately end up in your portfolio, but we want to have choices.

2 Lessons

Setting up your Plan B.

Your Plan B, or contingency plan, will take you from getting market returns to market-plus returns. 

Examples of a Plan B.

We learn by example. In this lesson I show several examples of what a Plan B. looks like.

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