Updated January 26, 2009 In early December of 2007, I wrote a post about how I would invest if I were just starting out. In that post I provided my thoughts on how any beginner investor should start building a portolfio of stocks. I then realized that although I talk about my approach to investing on this blog, I have never have provided a linear and complete view of my overall process. Thus, I am kicking that off today. Today begins a series of posts that will build into complete insight into The Dividend Guy Investment Process.
By the end of the series, you should have a very clear picture of how I manage my investment portfolio. This is not to suggest that this is the right way to build a portfolio, but rather so you can provide me with your feedback and to let me know if there is anything you do differently. I do not pretend to know everything about investing by any means, and part of my purpose for running this blog is to continually learn.
To get things going, I want to list whart I am calling The Dividend Guy Investing Code. This is a code of conduct, or prinicples so to speak, that I use to guide my overall potfolio decisions. It is useful because they are based off of researched and proven investing best practices. Any time I am making a decision for my portfolio I consider these and make sure that decision is in line. Here they are:
Overall principle: To conserve investment capital through the selection of a sound and diversified portfolio.
To achieve this I will:
1. Pick an appropriate and well diversified asset allocation and stick with it through thick and thin
2. Invest in a passive investing manner – use index funds as the primary building blocks for my portfolio (except in Employee Pension Plan where not all asset classes have index funds as an option)
3. Supplement, using a small percentage of my overall portfolio, with only the best and strongest dividend growth stocks
4. Generate a reliable and growing stream of income from dividend stocks
5. Maximize my employer contributions to both my pension plan and my employee savings plan
6. Only invest in companies I understand
7. Buy only companies that are selling at a discount
8. Only invest in companies that are dominant in their industry
9. Only invest in companies that have strong fundamentals (EPS, Revenue, ROE, etc.)
10. No individual stock holding to make up more than 10% of overall portfolio
11. If a company cuts its dividend, then immediately sell that stock and move money to another dividend growth stock (according to asset allocation)
In Part 2, I am going to talk about My Risk Profile.
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