How to Build a Rock-Solid Investment Portfolio

[Music] oh hey i didn't see you there i was just admiring these rocks i have and that's exactly what i'm going to show you today exactly how to build an investment portfolio that's rock solid bulletproof impenetrable ironclad basically just a really strong foundational portfolio for 2022. with 2021 coming to an end and the stock market on a seemingly crazy run the past two years or so a common theme that i get in my patreon and in my comments is that people think that it's too late to invest they also question whether or not they should start investing now with the stock market being quote so high my opinion is that while we don't know what's going to happen in 2022 if you're into long-term investing it's still a great time to build a portfolio starting today if you've seen other finance youtube videos or just talked to anyone interested in investing you may have heard that age old adage time in the market beats timing the market and that's actually been proven out with multiple studies so if you're a new investor or a seasoned one and you're looking to build a conservative long-term investment portfolio that builds your wealth over time yet still capture some upside then in this video we're going to do exactly that so first off if you're someone who just wants to sit back and relax and not have to worry too much about the daily swings of the market what you can actually just do is buy an etf that tracks a major index like the s p 500 that's a pretty good strategy for the investor looking to capture the returns the market and a passively managed etf like voo has been proven to be a good choice over time for example in 2021 alone it's returned about 15 year-to-date and in the past five years it's returned around 17.6 but considering you don't have to do anything with an etf you can just invest your money and forget it getting a return as good as 8 to 15 percent is going to be a solid option for most investors out there that might not want to be active investors now that etf strategy is pretty good for a beginner or an advanced investor who just might want to prioritize their time elsewhere like in their career instead for this video though i want to go into the allocation that i personally use that allows me to invest for the long term capture a lot of upside yet i still feel pretty safe by the whole things that i do hold so i'll bring up on the screen my exact allocation and we'll talk through each of them so the first with the least risky is going to be cash now my ideal target is to have 10 cash in my portfolio because i believe that okay my cash is safe here and it's also liquid in case i see great opportunities to buy in the stock market i also like having cash in the portfolio overall because then that means i hopefully won't be dipping into my cash savings in my normal checking or savings account in case i see an opportunity in a way it's kind of mentally limiting myself to ensure that i'm only investing with the money that i've set aside for the purpose of investing some people like to have more cash 15 in their portfolio and some people like to have none at all but for my portfolio i like to have a little bit of cash and that really helps me with a little bit of peace of mind as well before we move on to the investments the overall investment strategy of this portfolio i would say is to be aggressive in the right spots but conservative with everything else the majority of the portfolio will still be in conservative holdings since this is still a very long-term-minded portfolio it's not really a portfolio for day trading so if you are looking for that then this video is not the place to be all right so the next chunk of my investments will be in etfs these are the foundation of my portfolio and my philosophy is to basically keep a large chunk of my portfolio in etfs because these are just going to plug and chug at an average rate of return of around eight percent a year in the long term an etf is basically one security and by buying that one security you're splitting up your investment among all the pieces that the etf invests into so with an etf like vo for example as we mentioned earlier by putting say let's say a thousand dollars into voo your thousand dollar investment is split among the 511 stocks that it holds other etfs you can invest in are ones like vti which is the total u.s stock market or even sector-specific etfs like an energy etf or real estate etf for my etf allocation of this portfolio i like having 25 of my overall portfolio in etfs so if my portfolio was 10 000 i would allocate 2500 of that into different types of etfs or just one etf so etfs are going to be one part of my foundation the next allocation i want to put my money into are blue chip stocks these are your googles your ibm's your johnson johnsons your apples your amazons of the world they are super large capitalization stocks that are going to remain stable over a long period of time think of long-term businesses that should still be around in like 20 to 40 years a blue chip stock usually has an excellent reputation might even pay a dividend and they have dependable earnings and are profitable if you're looking for a filter from a market cap standpoint i'd be sticking to stocks that have a market cap of around 100 billion dollars that means that their valuation is at least 100 billion dollars so that definitely doesn't mean penny stocks and definitely not stocks they're brand new with no earnings for example rivian automotive has a market cap of around 90 billion but they haven't even produced any earnings yet be careful of just the market cap number and just make sure to use common sense here to give you guys some examples of some companies around the 100 billion mark that are pretty you know rock solid they include american express at 120 billion market cap cvs at 120 billion target at 118 and hsbc at 115 billion dollars you can even go higher on the list so looking at the top 10 apple microsoft google amazon facebook or meta or something like home depot or samsung these are going to be companies that are still going to anchor your portfolio yet they're still going to capture more upside than just a normal etf that tracks the market apple for example has been killing it this year up around 25 this year alone and home depot is up 54 just to give you an example so definitely look into these companies and make sure that they're profitable they have healthy balance sheets and their management teams are good if you really want to figure out how to do that i might make some videos on fundamental analysis of different companies and how i pick stocks so make sure to subscribe to the channel for that and also join 325 000 like-minded subscribers of the same channel all right so for the blue chip allocation i put 35 of my overall portfolio into blue chip stocks so if my portfolio size was again 10 000 that would mean i'm putting around 3 500 of my portfolio into blue chips so as you can see as of right now we've allocated 35 into blue chips 25 into etfs for a total of 60 into blue chips and etf stocks and we also have 10 in cash for a total of 70 of our portfolio being in relatively safe and stable investments for the long term that's going to leave us 30 percent for our portfolio to play around with and try for bigger upside plays that can hopefully produce outsized returns for our portfolio in the long run but the great thing here is at least our foundation is set that's what we really care about we know that as long as we hold these with a long-term vision we're most likely going to be pretty safe and preserve our capital before we move on to the next portion of the portfolio just know that even though i'm describing my portfolio as safe and stable it's still not immune to swings in the stock market so you always have to consider that there is going to be some risk when you're investing so the next chunk of asset allocation is going to be in growth stocks 25 of my allocation will be in gross stocks a grow stock is a stock that's expected to outperform the market but they're also going to have more downside during a market pullback gross stocks typically have characteristics like they don't have proven revenue or they have a new product that's supposed to be a differentiator or they're just plain too new or a combination of all the above for example amazon used to be a growth stock at the time everyone was selling stuff in brick and mortar stores books were mostly sold in person and amazon disrupted the entire e-commerce inbox space now that it's a really big company it's more classified as a blue chip but during that period of growth and innovation in the 2000s and 2010s you could have classified amazon as a growth stock their returns definitely reflect that as from 2011 to 2021 their stock has appreciated well over 158 percent now in contrast the s p index has earned a return of 287.5 since 2011. so basically amazon outperformed the market by 5.5 times in the decade prior most growth companies have a lot of inherent risk because of how unproven they are so i'm going to share with you guys one of my growth companies in my portfolio today which is palantir if you'd like to see everything i invest in that'll be in my patreon with the link down below but with palantir it's been constantly trading around the high teens or low 20s it's definitely underperformed the market and if you bought it back in january at its all-time high of 35 dollars per share you would be down close to 50 percent on your investment so why did i invest in it and why do i continue to hold it in my portfolio for example well the methodology that i use for picking gross stocks can be boiled down to a combination of the following first you should understand the company and exactly what it does second you try to get an understanding of their financials and their paths to profitability or even increased profitability in palantir's case they ended their recent quarter with 2.3 billion dollars on the balance sheet and no debt so i know that the company isn't exactly going bankrupt third i like to gauge if their product is needed or if there's demand for their product so in palantir's case over half of their revenues come from the us government palantir has a data visualization tool for understanding large data sets and i know that government contracts are usually long and entwined so once the us government becomes your customer i doubt they're going to be switching providers for analytics that quickly so i know that it's a company that in the long run should appreciate over time if all goes well and if they can continue to add external customers besides the government so just because i own palunder doesn't mean that you should go and blindly buy it make sure you do your own research and come up with your own ideas and different thesis around different stocks before adding them to your portfolio of the 25 chunk of your portfolio that's in gross stocks feel free to go all in on one conviction or split that 25 allocation up into a few different companies or as many companies as you see fit just remember the gross stock portion of your portfolio is for higher risk plays so you have to be okay with stomaching some volatility when it comes to this section of your portfolio all right so that leaves five percent left with this the five percent can be pretty flexible if you need more cash feel free to add it to the cash pile or feel free to add it to the growth or the blue chip pile but for me i like to put between five to ten percent of my total portfolio in crypto as well it's just an increased magnifier of risk but the potential upside is also greater i personally set aside five percent for this particular sample portfolio for cryptocurrency you guys will notice that i didn't include any bonds so right now bonds are pretty weak in terms of return and they just don't provide enough upside for the portfolio i'm trying to put together again if you are older or close to retirement you may want to take some percentage of each bucket and allocate them toward safer fixed income products like bonds all right so now i'm going to bring you into my computer for what the portfolio looks like in a google sheet and we can actually talk about the different number of holdings so as you can see right here this is a sample portfolio of ten thousand dollars and each section is divided into their types so we have etfs growth blue chip crypto and cash so i've personally just chosen one etf here which is ticker symbol vo which tracks the s p 500 but you can choose up to two or three and if you want more etf suggestions by the way please watch the other videos that i have on this channel there's five growth stocks in this portfolio including tesla shopify square palantir and airbnb honestly you can get away with a lot less or you can add more holdings altogether for the blue chips as you can see here i have some spread across different sectors so i have home depot for consumer target for consumer bank of america and american express are actually financial companies and then we have apple and google down here which are tech stocks as well now for the dollar amounts for the different stocks you can see that in the growth stocks i've just kind of split it up evenly across the board for the etf since i only had one i put the entire 25 into that one etf but this is kind of up to you you just kind of want to figure out how much you want to put into each one but as long as the total sector or the total basically type so blue chip growth etf or crypto amounts to the percentages we were talking about in the video then you should be pretty good as you can see from this table this exact portfolio has 25 in etfs 25 in growth as we talked about and so on and so forth so i would say when you're forming your portfolio for 2022 it's good to write it down before you start buying that way you can go in with a plan or even average into some of these positions so anyways i'm going to scroll right back up to the top right here and you guys can take a screenshot of this feel free to pause the video make sure to subscribe and also check out all my resources in the description below and i will see you guys in the next video which will hopefully be in a few days here alright peace

Channel: Humphrey Yang

Views: 162,642

Keywords: humphreytalks, stock market, personal finance, stock portfolio, growth stocks, stock market investing, how to invest money to make more money, stock market today analysis, investment portfolio update, investing for beginners uk, growth stocks vs dividend, stocks to buy now 2021, stock portfolio 2021, growth stocks 2022, investing for beginners 2021, investing for beginners 2022, investing for teens 2022, asset allocation, make a portfolio, how to do stock portfolio

Id: 4o46u3Bs3-4

Length: 12min 14sec (734 seconds)

Published: Mon Dec 06 2021