This past week has marked the beginning of my journey to become a better investor as I tackled getting my portfolio in order after years of neglect and thoughtless purchases.
My goal is to create a portfolio that can outperform the market by having at least 25% returns over the next 5 years. I arrived at that number after figuring out where I want my life to be 5 years. I am 26 years old, I have a fiancé, and in 5 years we plan to start a family. We want to raise our family in the mountains in Colorado, and I want to be as present as possible in my family’s life. So, at least $2 million in the bank would make that life absolutley possible. I currently have about $250K saved up, and plan to save about $2000 annually.
Before this week, my stock portfolio consisted of the following:
- ~20% in random stocks (some were great choices, some not so much, but all were bought without considering how they fit into my portfolio to help me achieve my goals).
- ~20% In the S&P 500 via SPY.
- ~60% in a slow moving brokerage that averages about a 7% return.
To achieve my desired 25% annual return, I plan to build a stock portfolio consisting of the following:
- ~35% in high conviction, mega growth stocks.
- ~25% in mid cap, high beta growth stocks.
- ~10% in core growth ETFs.
- ~10% in international growth markets.
- ~10% in dry powder/cash to redeploy when needed.
To be perfectly clear, that proposd portfolio is certainly a draft. I worked with Chat GPT to determine that, but I may re evaluate it that is really the best allocation of capital for my goal.
When it came to cleaning house, I was nervous to sell stocks to free up the capital necessary to create an organized, high returning portfolio because I was fearful of missing gains in the immediate future. So, I took emotion out of the decision and followed this process for each stock to determine if it should be sold:
- Determine if stock belongs in my new portfolio. This was difficult, and I erred on the side of selling, as I want a clean slate.
- If not, sell the stock.
- If the stock was on the rise, I used Stop market orders. For example, I owned LULU, and it was on the rise this past week, so I put a stop order in for 180 to capture some of the gains it had.
- If the stock was stagnant I sold.
For the most part, the stocks I owned made up a very small percentage of my overall portfolio. So, selling was more emotional than rational. Eventually, I realized losing $500 so that I can focus on getting my portfolio in shape is money well spent.
Anyway, this week has been a bit of a grind at my job, so I’ll leave this post fairly brief. Next week, I will have more updates on the new structure of my portfolio and how I came to that decision, and what stocks I am considering to buy.
Thank you for reading, and I would love to hear your feedback on my first steps for creating my dream portfolio, so please drop any thoughts in comments! Here are some questions to get you started:
- What shape is your portfolio in? How does it align with your investment goals?
- What do you think of my approach freeing up capital to restructure my portfolio?
- What are your thoughts on using Stop market orders when ou want to eventually ditch a stock?
Better Investor Project 