How To Build A Kick Ass Investment Portfolio In 2021

what's up you guys sasha here i've worked in senior positions and advised and consulted some of the world's largest banks and financial services companies for many many years and now i do youtube to go and share some of my thoughts and personal opinions on personal finance with you now today i want to talk about the best way to structure an investment portfolio in 2021 from my perspective it's really important to remember that this is just my opinion i am not a financial advisor i can't provide financial advice to you and if you do need actual financial advice make sure you go and seek a qualified professional now before we jump into the numbers and the distributions let me cover a couple of really important points now point number one is investing your money does carry a risk putting your money in the stock market can mean that you may lose quite a large part of it if you're investing in the wrong things if you're investing in the wrong way or even if you are not doing anything wrong at all and there is a giant market crash your money could be wiped out you could lose 50 you could lose 90 you could lose 100 of the entire amount invested in just a few seconds crashes do happen sometimes they happen when people expect them sometimes to happen when nobody expects them and in 2021 there might be one coming soon there may not be a crash at all we might be growing for the entire year nobody really knows but it's really important so i wanted to mention it up front and the second point is you can't become wealthy just by doing investments investments are a great way to grow your wealth as long as you keep putting money into it as long as you keep investing over time and adding more money into that portfolio if you go and put 100 pounds in it up front and wait 50 years i can tell you right now nothing much is going to happen sure it will grow and it might be 500 pounds or even 5 000 pounds but you are not going to be some kind of millionaire investing is a great way of growing assets that you've already built up so you've earned somewhere else you've done some work somewhere you got paid and you put the money into investing but you won't become rich just from the investing activity alone now talking about the actual investment portfolio the really important point i want to make up front is that i don't do short term trading i don't do day trading i don't invest on swings i don't care about fluctuations and price i don't try to time the moment when i buy things or when i sell things i have no interest whatsoever in doing that i have better things to do with my time and i have better things to worry about i believe that there are a million different reasons why stocks can go up and down some of them some people may sort of be able to know or predict many of them people will have no idea because there's institutional investors with their priorities and there's internal company issues and there's just opposition different things i don't really want to play there because that's not my thing i invest for the long term i'm interested in investing in companies for long term value where the money i put in today can be worth way more sometimes like multiples more sometime down the line i'm interested in companies that go places where the products and services they deliver go and completely kill it in the industry that they're in that's the kind of thing i'm interested in i put in money today and in some months i've gained 10 20 30 maybe even more percent on that money that's what i'm after now the first money to allocate out of an investment portfolio has to go towards some kind of an emergency fund and here i have a slightly different way of thinking about it to perhaps something you've heard from other people and that is i don't believe the entire amount of your emergency fund has to sit there in cash doing absolutely nothing losing money because of inflation and just being a colossal waste of money especially if you don't have that much money in the first place i think there has to be a sweet medium and i kind of believe that you should have about two months worth of money that is always available in cash either in your current account or a separate current account you hold where if you need cash on a sunday night and it needs to be urgently there and you can't use cars and and whatever else reason you can go and access that cash you can go and withdraw it from cash machines you can go and transfer the money over to whatever bank account that's required i don't know i don't care what reason it is sometimes you need that money and sometimes you need it urgently and i feel like having more than a month's worth is quite important because one month is quite a tight amount but i don't think having more than two months worth of money sitting in cash is really particularly practical because a lot of people will tell you that they think that your emergency fund needs to be three to six months depending on the person you listen to when i hear this kind of thing i kind of think in my head well that is a long time because why are you holding that much cash for an emergency because you might go and lose your job you might have some kind of unfortunate incident or accident or issue with your family where suddenly you need a load of money in the next few months and you don't have it at that moment if you don't have an emergency fund but here is the thing if you do have funds elsewhere that you can liquidate relatively easily relatively quickly and get that money from those places or if you're able to go and spend money via other means without having to have pointless cash sitting in your account is that a better strategy and in my opinion i would say yes now i am by no means advising people that they should go and get into debt if they get into some kind of trouble because they haven't saved up enough cash but what i would say is and this is what i personally do is i have several different options available to me as part of my general emergency planning i have a few different credit cards that i constantly have some of them have zero percent on purchases and their percent of money transfer offers and all kinds of other weird and wonderful things and i have those credit cards sitting there always because i can always go and use them in addition to the two-month emergency fund that i just covered and i'm not saying that i should go and build up a balance on them and then be paying interest and things like that but what i'm saying is those allow me to go and spend money at a point when i may not have the funds to immediately go and spend if something breaks in my house and i have to spend 6 000 pounds to repair it and i don't happen to have that money sitting there i can go and use a credit card to go and spend a while i am getting my funds out of sources where they're not immediately available but are still somewhat liquid for example in investments and generally speaking if you have two months worth of time in order to source additional funds for the moment that you need money to pay for your living expenses beyond that two-month period i would say that any general investment portfolio probably can be liquidated and you can go and get your money back out in those time frames so i don't think that you need as long a window if you have cash available in other types of relatively liquid assets as some other people will say so let's use a typical example for a family that for example spends 2 000 pounds a month on living expenses let's say there's like a 700 or 900 pound mortgage electricity utility bills food whatever it is you're spending 2 000 pounds on just being able to sort of live and being able to afford your relatively normal lifestyle i would say in that circumstance if it was me i would have four thousand pounds available either in the bank account as a minimum buffer and a separate bank account or somewhere in a basically cash equivalent and then i would make sure that on top of that four thousand pounds i then have another eight thousand pounds available in credit limits or in some other easy to use way i'm not going to go into the depths of that but i like credit cards because they're very very easy to explain in this circumstance and then i want to make sure that i have at least eight thousand pounds worth of assets that i can then liquidate in order to cover that gap and not have to build up balances and credit cards and not have to get into any kind of debt so using the exact same example the family that has say 2 000 pounds worth a month of living expenses i would be targeting somewhere around 40 000 pounds plus in terms of saving slash investments and out of that i'll then dedicate 10 percent essentially to my cash fund that i just mentioned and that'll be my first part of my overall investment portfolio that 10 would be sitting there doing exactly nothing for that one moment when you really urgently need it the next part of my strategy is to take the next 10 and allocate it to a stable long-term growth index in my opinion i quite like the s p 500 that is the listing of 500 largest companies in the us according to a few metrics and parameters as to how companies get entered into that list but i really like that index because over long periods of time it consistently delivers sure it drops just like any other investment but then it recovers and then it grows and if you had all your money invested into the s p 500 in 2020 you would have had a growth of over 17 which is phenomenal and that is certainly one of the better years but even talking on average including the drops and including bad years you can still reasonably expect your portfolio to grow seven to nine percent before inflation every single year which is which is pretty good and and actually probably will do fine for most people if you don't want to be an active investor if you don't want to be picking stocks if you don't want to manage your portfolio if you don't want to do research on which companies you want to invest in and stuff like that just putting your investments in an index like the s p 500 will achieve still really really good results in fact if you look at any number of studies over time just investing in the index will in the vast majority of cases beat trying to beat that index through active investing because a lot of people will invest with fund managers which in some cases is a really bad idea because those fund managers will return far less than if you just stuck it in the index and some people invest in companies that they know or that they are familiar with and they don't think about the stock market in maybe the most profitable kind of way and as a result there will sometimes invest in companies that don't grow and don't really pay much dividend yields because they're like the stability of dividends but those dividends are only paying two percent rather than being able to earn say seven nine seventeen percent per year instead so after those first twenty 20 the next 20 i invest in what i call the behemoths and the behemoths for me are companies that are really giants in their industries they are the market leaders with absolutely nowhere in sight trying to even get close to them they are dominating they are performing year after year they have huge capitalizations they have massive assets they have huge customer bases they provide a multitude of different services and different offerings and they are there to stay they're there to stay there not gonna disappear overnight they control the ways entire countries work and entire industries work that's where i put 20 of my money now there's one critical thing here i only put my money in behemoths that are in industries that are not in some kind of decline and that's really important and probably different to a lot of people because a lot of people like to have their money in large petroleum companies for example i don't carry any money in those companies because the overall industry over the long period over say the next 20 30 years is going to be in decline sure some of those companies will transform themselves and for example some of them might become big energy players instead of just being focused on petroleum as their primary industry but i don't know which companies are going to be doing that yet not many of them are doing that much in that space at the moment some are trying but not many are doing that much so at the moment i don't have any money in those and i don't generally invest in any companies where the industry they're in is in the process of shrinking or declining so in my particular portfolio some examples of these companies that i'm mentioning that i would say are behemoths in their industries are companies like google microsoft coca-cola pepsi apple those types of companies where if there was a risk to their existence or a risk to their share price or a risk to you know them being the dominant player you would see it from many many miles away you would have lots of time to adjust your strategy to maybe reduce your holdings or withdraw money all together generally speaking these types of companies are incredibly robust in the long term and that's why i have the first 20 invested in there so the first 40 percent we've already dealt with now we need to deal with the next 60. now the next 40 i would invest in what i call high growth squared companies and i'm gonna try to explain this as quickly as possible for me high growth squared is a strategy where you pick companies that are already established already large already really really big in the industry but not quite at that behemoth level but where those companies are still growing very aggressively but not only that here's a squared bit i also wanted to be in an industry that itself is growing really aggressively as well and then if those companies do well then my expectation is that i get the multiplicative effect of the company growing within their industry and then that industry also growing relative to like the world and as a result the multiplication of those two factors can yield really really big results examples of companies that i would class in this particular bracket that i have 40 of my money in are companies like adobe amd nvidia pinterest slack square and some others that i hold as well let me give you a really brief example the world of remote working has been growing massively and the world of people being able to do one-off gigs and people hiring people not as employees but as some kind of contractors or for fixed-on projects that world has been growing for some time even before 2020 happened but it's only being accelerated now by what's going on people are more happy to be working remotely people are more happy to be hiring people for a very specific task and as a result there are more people who are working from home or from small offices local to where they live with their own gear and some very high skilled work is still being carried out by these people so things like engineering work things like modeling things like various complicated computational maps type work things like video editing and processing and various other types of high skilled work that require very powerful computing and for most of these types of work some of the hardware required is provided by specific companies and in the case of pretty much all the examples i mentioned the two companies that are completely dominating this space and are continuing to grow their margins even though they're pretty much already dominating the entire thing are amd and nvidia but not only is this process happening in developed countries but developing countries are coming up from being largely product-based to an increasing amount of services being provided and done in those countries and as those countries move into the service world they will begin adopting the same types of business models and they will require all the same gear to do the same kinds of work anyway enough of that example i now have 20 left and the last 20 percent i invest in what i would say are the high very high potential gray stocks these are not very established companies these are companies that are typically going to be up and coming they are potentially disrupting an industry where they're a small player versus some much larger players that do something similar but potentially in a different way they will often not be as mature they maybe will be only a few years old they potentially will have fluctuating financial performance their products are still maybe going to be somewhat raw maybe not quite as established but these companies in some cases based on my personal opinion have really really high opportunity to grow and i put the last 20 of my money into these companies because the returns can be ridiculously big to give you a few examples of companies that i would have in this category they are pinterest that i hold a smile direct club and twilio i'm not going to go into the details but each of them has much much bigger competitors much much bigger industries that they're trying to disrupt they're trying to change behavior and people are really liking it and people are beginning to really turn to it and they're getting lots of traction but they're still early on in that transformative journey and in each case the majority of their potential customer base is still using other services and still using other tools and still using other providers and that's what i really like where their opportunity is to grow really really rapidly for several years from now so that's it that's my 100 i hope you guys found this useful if you have please make sure you smash the like button for youtube algorithm so that a few more people can go and watch this video if you like this type of content and interested in all things personal finance and managing money make sure you subscribe to this channel that is exactly what i talk about in every single video thank you so much for watching and i'll see you guys later you

Channel: Sasha Yanshin

Views: 20,329

Keywords: investing in 2021, stock market 2021, investing for beginners, investing in stocks for beginners, investing stocks, investing strategies, investing portfolio, how to build an investment portfolio, investment portfolio, investing 2021, investing strategy 2021, investing strategies for beginners, how to invest, how to invest money, how to invest in stocks for beginners, investing, investing in stocks

Id: n0FNxXNjyvg

Length: 16min 23sec (983 seconds)

Published: Fri Jan 08 2021