In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you.
Warren Buffett
12/31/2020
Portfolio(I) is built on the idea of Benjamin Graham's Defensive Investment and the thought of Rx - Prescription for Jenn's Basic Investment. The idea is to invest in the major stock market by buying an index fund or ETF that contains several hundred securities. In this way, the investment is going with the economy and market as a whole; hence, it significantly reduces risk and eliminates the cost and time of picking individual security. It is a super advantageously layman way to invest.
The portfolio usually includes only one index fund or ETF. S&P 500 is the most popular index for tracking the market. See the idea for Rx - Prescription for Jenn's basic investment and update here.
This such convenient investment tool usually is provided for 401/403, TSP and other retirement plans by their management institutions and mandated by DOL.
Also, any brokerage account for investment is provided the function to trade/invest index funds and ETFs. The tracking record for such index funds and ETFs will be slightly lower than index itself due to the fees pay to management institutions. Nevertheless, it is most worry-free, risk-diversity, growth-orientated and simplest way of investment.
To understand more, see Intelligent Investor by Benjamin Graham. (not an advertisement for Amazon.com)
The following Portfolio(IV) sends a very clear message: Investing in Index Funds or ETF is actually an intelligent move.
Unless an investor is living in lucky dome and invests all the money in Amazon, Apple, Netflix or even Tesla, Roku or SolarEdge.
1/23/2021
Portfolio(II) focuses on "income generation". A significant portion, 40-50% of portfolio, is invested in bond, dividend paying securities and cash. Another part of portfolio focuses on capital gain. These two-parts approach will increase income by re-investing income and using capital gain in cash-paying securities and dividend growth. Also, Portfolio II is concentrated. Usually, financial advisers utilize bond funds and dividend-paying funds to compose income part of a portfolio. In this way, portfolios are diverse and risk-reduced.
Concentration investment always involves the risk of losing significant capital of a portfolio due to one failed investment.
1/23/2021
This portfolio holds less than 20 securities, and it is concentrated, not diverse and not evenly constructed. Portfolio(III) involves a high risk of total lost of a significant portion of money if any business operation of large holdings goes wrong. Stock price may incur significant decline and cause loss of money even business operations are running excellent. Moreover, it is a great difficulty to recover such huge money loss and full of painful regret and agony. When $10000 is lost, It will take another $10000 to gain 100% to get back the lost.
The composition of Portfolio(III) is built following the ideas listed in "Thought". However, personal tolerance for risk, affordability of risk, interest and investment principle should dictate how much weight is on each investment position.
1/23/2021
Portfolio(IV) demonstrates the utmost importance of Warren Buffett's Rule No. 1: Never Lose Money.
The result of losing money of a portfolio is disastrous, extremely dissatisfactory and sleepless nights.
Lessons should have learned.