Building and Keeping a Portfolio
How do you build a portfolio and keep it on track?
In brief
A portfolio is a plan: a mix of assets suited to your goals and nerves, kept in shape by simple rules, mainly regular contributions and occasional rebalancing.
Key ideas
Mix by purpose
Money needed soon should not be exposed to large swings; long-term money can be.
Make an insight card →Rebalance by rule
Return to your target mix on a schedule or when it drifts by a set amount.
Make an insight card →Try it
Rebalancing
Over time winners grow and the mix drifts. Rebalancing is the discipline of returning to your chosen mix, selling some of what has risen and buying what has lagged, or simply directing new money.
Open the full page: formula, variables, worked example and cautions →
Also relevant: The cost of investing
Red flag
Frequent trading, or a new “opportunity” each time you speak with an adviser.
Ask before you sign
- How does this fit my goals and timeline?
- What is the plan if one holding becomes a large share of the whole?
Do this week
Calculate your drift with the rebalancing tool.
Try it · 10–45 minutes
Write your target mix and rebalancing rule on one page.
See it in a life
Cases that bring this chapter to life
Pause and reflect
Private to this device. Nothing is sent anywhere.
Words worth knowing
- Portfolio
- All your investments considered together.
- Rebalancing
- Restoring a portfolio to its target mix after some holdings have grown or fallen more than others.
- Asset allocation
- How an investment portfolio is divided between kinds of assets, such as shares, bonds and cash.
- Diversification
- Spreading money across many holdings so that no single failure can badly damage the whole.
Companion notes written for this website, based on the topics of Chapter 22. They explain ideas and do not reproduce the book. General information, not personal advice.