As I have said before, an important component of portfolio management is to ensure you are always learning and adjusting your strategy to identified best practices. I am not talking about changing your strategy whole-hog when the whim strikes you. I am talking about refinements to your strategy that will make your portfolio stronger and perform better. I have done this through the addition of Part 11 of The Dividend Guy Investment Process – Things I Won’t Do In My Portfolio. The list is inspired by Dave Van Knapp over at SensibleStocks.[ad#tdg-embedded]
As a reminder before I begin, here is my overall objective identified in Part 1 of this series:
To conserve investment capital through the selection of a sound and diversified portfolio
With this in mind, here are the list of things I will not do as part of my portfolio management principles:
1. Use margin to purchase purchase assets
I am trying to conserve capital and using margin can exasperate loses.
2. Use mechanical investing to buy stocks
I have tried mechanical investing in the past and find I lose faith when things go wrong which is when you should be sticking with it. It is a personal thing for me. I will however use stock screens to identify stocks for further research.
3. Make wholesale changes to my strategy without sound research and evidence that my current strategy is no longer valid.
When researching investing it is very easy to get sucked into the “next best thing”. However, typically the tried and true investment principles which my original strategy is based on wins out over the new world!
4. Fall in love with a stock
All companies can screw up big time – look at once beloved dividend growth darling Bank of America. Things turned around really fast. I will sell during a dividend cut – no matter how much I like the company.
5. Buy any asset if the fees to do so are over 2%
I try to keep transaction costs to around 1% – that includes factoring in the expense ratio for ETFs. So if my commission to buy an ETF is 0.5% of the trade then I do not want to see an ETF expense ration more than 0.5%.
I am sure that as time evolves I am going to add to this list – when I do I will let you know.