Home 9 Blog Posts 9 Asset Management 9 Stock portfolios – building, managing and protecting them

Stock portfolios – building, managing and protecting them

March 17, 2021
Stock portfolios - building, managing and protecting them

What is a stock portfolio?

Let’s start with the definition. The stock portfolio is a component of the investment portfolio that contains various stocks. Think of it as more of a concept than a physical collection.
Depending on the country you’re in and on the method or application for trading you’re using – there might be certain limitations related to the types and volumes of stocks you can trade. Unlike the investment portfolio which can contain various types of assets, the stock portfolio contains all the stocks you hold.

Are there different types of stock portfolios?

The first step towards building your own stock portfolio is to determine its purpose.

Determine what you’d like to achieve:

  • Is your goal to have an additional income that you collect on a regular basis? Then you’re looking at an Income Stock Portfolio, where the thing that benefits you most are dividends from reliable stocks that you’re looking to hold for longer periods of time.
    Those are usually stable, long-standing companies with impeccable financial performance over the years. Risk in such stock portfolios is traditionally considered to be lower compared to other types;
  • If you’re looking to profit from a difficult economic situation by buying undervalued assets, then a Value Stock Portfolio would better serve your needs. Those are usually stocks of companies that are currently valued below what their market value is determined to be.
    Their profit potential remains good but their stocks are currently cheaper due to the company struggling to deal with harsh economic conditions. Risk is considered to be low-to-medium;
  • The highest risk is usually associated with Growth Stock Portfolios. Those are generally young companies in fast-paced industries that show significant growth potential. By acquiring stocks in such companies you support that growth and you demonstrate a firm belief in the companies and the industry in general. The potential for profit is usually highest in such portfolios, however so is the risk.

Depending on your goal, you could also include ETFs (exchange traded funds) in your stock portfolio. They usually help with diversification and if chosen wisely can greatly help with reaching your target. While there are many other benefits of ETFs, including lower fees and tax efficiency, there are some disadvantages as well, such as less control over your investment and lower dividend yields.

Another important thing to understand about ETFs is that they’re a basket of assets – meaning although they’re traded on stock exchanges, they can contain other financial assets too, such as bonds and commodities.

Building your own stock portfolio

Now that you’ve determined your goal, you can start building your stock portfolio. There are many ways to accomplish that, but the main differentiator is whether you’re going to use someone’s help or not. Apart from having a personal broker at a firm, you could also register for a web or mobile application that allows you to trade.

There are some considerations here:

  • Most applications have a minimum deposit amount required to start trading. Some of them have an additional minimum amount per trading operation;
  • Commission varies – always do your research beforehand and choose the option that best suits your needs. Make sure to research all types of commissions in your chosen application or firm – per trade, per month, per market, etc.;
  • Investment firms and applications usually have different account tiers – those can be based on many things, such as minimum initial investment, desired number of trades, support packages, personal assistant, etc.;

Once you’ve chosen how to proceed in terms of a trading platform, it’s always a good idea to start with a company or industry you know. While you can absolutely receive great advice from other people, following your own knowledge and intuition is key. Investing in stocks can lead to great financial profits, but in order to achieve them you must first build yourself as a solid investor.

That includes things like:

  • Mastering researching and analyzing companies and markets;
  • Making calculated moves, not hasty decisions;
  • Investing in increments;
  • Knowing exactly what you’re hoping to achieve and staying true to your goals;
  • Following the market closely and identifying shifts or trends.

Managing your stock portfolio

The most important thing to understand is – stock investments are dynamic, there is no stagnation. You have to constantly monitor your existing portfolio and research both the companies and the industries you’ve invested in. This aligns perfectly with the goal of your stock portfolio, which (regardless of what type of portfolio you’ve chosen) is to increase the value of your assets.

If you’ve got stocks from 1-5 companies in the same or in just a few industries, chances are you’d probably be OK with doing the research and monitoring on your own. But regardless of whether you’re within those boundaries or have 15 or more stocks in your portfolio – it’s always a good idea to get professional help whenever possible – like personal account managers. Mobile and web applications usually have great functionality that allows you to automate some of your research and even parts of your trading.

Staying within the realm of what you know and understand is something people often forget in the hope of quick wins. That doesn’t mean to never expand your stock portfolio into other industries – it just means to do your due diligence and extensive research before entering a new industry. And also to never enter the market thinking you’re going to get rich in a day without putting in hard work.

Securing your stock portfolio – think two steps ahead

Another really important aspect of managing your portfolio is securing it. All the hard work you’ve done in building your portfolio can go to waste if it’s not protected. While you could definitely use one platform for trading ETFs, a second for trading stocks in a growing industry and also enlist the help of a professional stock broker – what happens if an unforeseen event occurs; how are your loved ones going to be notified of your many assets?

This is particularly true today – with the complex, dynamically changing assets we have, stock portfolios being just one part of them. For those of us who are expats – it becomes even more complex, given how our bank accounts, insurance policies and stocks are spread across multiple countries.

Let’s say your loved ones are aware of your assets – are you confident that they’re savvy enough to understand and receive or continue to manage them? It’s very common for one of the partners within a family to be financially proficient while the other isn’t. For a person who hasn’t dealt with stocks, insurance policies and brokers it can be very overwhelming to start dealing with such matters all of a sudden.

It’s not all dark and gloomy and we’re definitely not trying to deter you from building and managing your stock portfolio. All we’re saying is – think two steps ahead and ensure the fruits of your hard work go where they belong if something happens to you. What’s more – there is already a solution for all this that can give you and your loved ones peace of mind! Digital inheritance is here to lead the way in making sure the fruits of all our hard work go exactly where they’re supposed to.

Victor Minev
Product guy, email nerd. Loves to talk about all product-related things. Domains - email, cybersecurity, compliance, fintech, sportsbetting, retail.