Building For The Future (Part 2)

How do you craft a portfolio?

Assembling a financial portfolio is a lot like building a house. Everyone has a basic need for shelter, but once you get beyond the basics there are all kinds of decisions to make—where to locate, how big to make it, what kind of materials to use, and so on. Building a home can be stressful—but it can be exhilarating, too.

In the same way, putting an investment portfolio together can be stressful but also can be exciting. The projects are similar, especially because they both start with the owner’s needs, desires, and resources. By taking stock of yourself, you end up with a much more satisfying product.

The first question to ask is what do you want your portfolio to accomplish. Some people are looking for supplemental income, others are saving for their children’s college tuition, and other people have other goals. Whatever the objective is, write it down.

Then try to make a rough estimate as to what this will cost. For example, many private colleges cost about $200,000 over four years. If you can only set aside $400 / month, that will accumulate $72 thousand over fifteen years. If you want to have half the cost of college saved up, this goal implies that you will need about a 5% return over this period. If you can save more, your required return is lower.

Your required return will indicate what kinds of assets you need to invest in. Everyone wants safety—but most people also need growth. By specifying your objectives, you can sketch out a plan that is more likely to meet your needs, without keeping you up at night.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2013-02-19T10:00:06+00:00 February 19th, 2013|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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