 It's so easy, I can do it myself. That's what today's economy is telling us with the accessibility that we've never experienced before in the financial market. So for a primary example, let's say two or three years ago, not two threes, let's say 20 or 30 years ago, in order if you wanted to buy stocks, you had to have a stockbroker, you had to go talk to some guy in a fancy suit behind a desk somewhere or whatever, right? Now we fast forward to 2021 and everybody has apps. Everybody has phones. Everybody has internet. The internet, we live in the information age where information flies across the world within seconds. And with that being said, now a lot of people are taking investing into their own hands. But many times people make very crucial mistakes on not knowing that they have a winning portfolio, a losing portfolio, on knowing how to build a portfolio properly on their own. So in this episode, I'm not going to disclaim this and say that by no way I'm saying hey, do this for your portfolio, but I'm going to use some key nuggets that I think that you can take a board to say, hey, I want to build my own portfolio. You may be someone with the E-Trade app, the Robin Hood app, TD Ameritrade app, Charles Swap, or you may have an online account or whatever, and you're buying particular stocks to better yourself, your children, things like that, very commendable. But for many people, knowing where to start and how to build is very difficult. So with my experience in formal education and formal education, hopefully I can drop some gems and that you can take for with you. But before we get into that, don't forget to hit the like, subscribe, comment, and share button. And as always, my name is Prince Dax. Welcome to The Prince of Investment, coming to you live all the way from the beautiful city and state of Denver, Colorado via HALALU, Hawaii. So the first thing you must think about is the first couple of questions you've got to ask yourself. There's no one size fit all for anybody when it comes down to the world of investing. So you have to ask yourself about seven questions before you can get into investing. First, what is your time horizon? One year, 20 years, 10 years, five years. What is your time horizon? The second thing is, what is your risk level? Are you a high risk person, low risk person, what is your risk level? Number three, how much money do you have? $30,000? $30? $300? $3 million? Those are the top three questions you must ask yourself before you can go anywhere, before you can go any further, before peaking anything, thinking about a company, anything like that. Number one, why is time horizon so important? Time horizon is so important because let's say, for example, if I'm saving for my son's college and he's 10 years old, I have a totally different investment strategy versus if he was 17 years old and he needs the money by next year. Totally different, right? So with that being said, you have to know the difference between knowing your time horizon. How long do you have? Is it one year or 10 years? Now, when you say prints, it's going to be totally different. Why is it totally different? So the person who has 10 years, they can take more risk versus the person who has one year may not want to take as much risk. If I have to pay tuition by tomorrow, guess what? I don't want to take that much risk on my capital to the day. So guess what? Someone who has a time horizon in one year who's, quote unquote, short term, they may be someone who's looking into CDs, maybe a savings account, maybe some type of very conservative bond, maybe a corporate bond, maybe T bills, something of that nature versus someone who's long term. Then there's someone who can jump into stocks, right? And I will, you know, the rule of thumb is if you don't have more than five years of a time horizon, you should be investing in stocks, right? So that's the first thing. That's why time horizon is important. Second, risk level. Some people say, print some high risk, have fun. I want to buy high risk things. You may jump into tech stocks. First, some people say, well, I'm a little bit, a little bit moderate. You know, I want some risk, maybe not so much risk. Then they may jump into maybe something like consumer staples, maybe something like more financially stable, a household name, you know, maybe like a Coca-Cola. Hey, I can grow my money, collect a little dividend, but I don't want too much risk. Then you may have someone who's very conservative, but they want to invest. That may be someone who may look at a particular ETF, mutual fund, or just a simple broad base index, right? So that's why time horizon important. Number two, risk level is important because you can see how time horizon and risk level can change what an investor would do. Number three, how much money do you have? Pretty simple one. I need to know how much money you have or you need to know how much money you have because it limits on what you can do. If I had $30,000, hey, I can afford Amazon. If I only have $300, no, I cannot afford Amazon. Or if I have $100 or if I have $100 and I want to put $50 in every month, so know how much money you have, it's very important. Now, once you know those three things, now you know enough to be dangerous. Now I'm going to segue into a good friend of mine. I need to catch up with him. He's out of the UK. He's a hedge fund manager by the name of Lars Kroger. Lars Kroger is someone, he's a hedge fund manager. He's a Harvard graduate. He's been on the show once or twice himself and he wrote a book called Investing Demycified. And in his book, he has the most boring way of investing I think I've probably ever seen. And investing Demycified, it's a little complicated in a way to understand his writing. It's a little bit, not complicated but for an amateur investor, it could be a little bit hard to start out with. But for someone who's intermediate to expert level, it could be a little bit easier. He has a lot of math in there. He's a high quality thinker. But his whole premise of his book is how to invest without speculating. Oh, that sounds crazy. His idea is, hey, you're gonna get a total market index fund. You're gonna get bonds. That's it. You're gonna have two investments. Bonds and equities. AKA, you're gonna have one index fund that tracks a broad-based index, something like the S&P 500 or you can get a total market fund or S&P 500, Dow Jones or what's the other one there, Nasdaq which most of you know Nasdaq is a little bit more tech and risky, haven't been doing so good this year but a broad-based index, right? Now once you have that broad-based index, he says, hey, now you're gonna turn around and you're gonna pick out bonds. Bonds, that's it. Yes, you get a bond, ETF, that's it. That's it, right? And what he says is that when you're young, maybe 70% stocks, 30% bonds, as you get older, it becomes 50% stocks, 50% bonds. As you get into your latter golden age years when you're more concerned with preserving capital, you may go 30% stocks, 70% bonds. So his whole idea is to, hey, look, you don't have to, don't worry about what the market is doing. Don't worry about what the market is doing. Don't worry about what stocks are doing. Don't worry about the new highs flying stocks. You're gonna buy index fund and you're gonna buy bonds. That's it. When you're young, 90% stocks, 10% bonds. When you get to your 30s, 70% stocks, 30% bonds. And I'm happy that I could speak in here. You get to your 50s, 50% stocks, 50% bonds. You get to your 60s, retirement age, 30% stocks, 70% bonds. So by hearing that, you can see that you're using less and less stocks as you get older, you're becoming more and more conservative. That's his ideology, that's his belief, and you invest into that over and over. Investing, demystified. Not a bad idea, right? Cause those bonds are drawing you a nice little thing there. But for most people, we're not gonna do that. The average person and people who are in their 20s and 30s, people just tuning in, watching this, catching a playback, they're not gonna do that. They're not gonna sit back and say, hey, we're going to just buy a stock in a bond ETF and forget about it. Not with all this exciting stuff going around. We got crypto taking off. We got NFTs just coming out of nowhere. We have Robinhood is going public, Coinbase is going public, Airbnb, Uber, all these high-flying IPOs flying left and right. What's gonna be the future? I can make more money than that. So that's what everybody's gonna think. That's why you tuned in. Now we're gonna get into exactly how you build out a portfolio. But later on in the show, we're gonna give out a gem. And what I mean by giving out a gem, we're gonna talk about is exactly how to find and gems you can use to exactly find what you're looking for, right? Y'all like my sound effects. So anyway, so when you start off with this whole thing of a market, now we just spoke about one of the easy, simplistic ways made famous by Lars Kroger and invested in Demisify, where you said just get a stock ETF and get a bond ETF, call it a day. So you're someone that's at home saying, no, I wanna start my own portfolio, what do I wanna do? Now, with that being said, ask yourself this before we get into that. How do you know if your portfolio is successful or not? How do you know? How do you know if your portfolio is successful? Many people say, well, it makes money, okay? If it makes $10, is that good? What if it makes $10,000, is that good? What if it goes negative, is that good? What is it? What is your comparison? How are you gonna match it up against the market? The answer is use the benchmark of finance. The benchmark of finance is drum roll please. Wish I'd had my drum roll queued up. But the drum roll please is the S&P 500 index. That's the top 500 companies in America. That is used to be your benchmark. At the end of the year or at the end of this quarter, did my portfolio beat the S&P 500? No, if it's no, you should be moving more and more towards the S&P 500. If it's yes, you should be moving more and more towards your own portfolio. But most people don't do that. Investors have amnesia. I see some people hold 10, 30, 40, 50 stocks and they only talk about the winners. They forget about the losers. But you gotta remember, it's not all about the winners and the losers. It's about the entire portfolio. Did the portfolio is it up by 5%, 10%, 20%, 30, 40, 50? How much is it up by? How much is the portfolio up by? Or how much is the portfolio down by? So for prime example, I never look at, oh, look at my Uber stock is doing great. Look at my Apple stock is doing great. I look at what is the entire portfolio doing compared to the S&P 500. So that would be my first stop to you to look at how is your portfolio performing against the S&P 500 index. Now, we're gonna get into the juicy stuff what everybody's tuning in for, what everybody loves to hear. How Prince, I have a Robin Hood or E-Trade or a TD Ameritrade and I'm trying to build a portfolio. How do I do that individually by myself? That's exactly what we're gonna talk about. After the break, of course. So right here, we're gonna take a quick break. Very quick break and we're gonna come back and we're gonna jump into exactly how you can narrow down using four steps, how you can narrow down exactly to find out what stocks to add to your portfolio. We already talked about gauging it and we already talked about how you can invest without speculating if you're a little bit more conservative, but we're gonna tell you exactly how you can build your exact own portfolio on your own. So stay tuned, we'll be right back. Building your own portfolio, taking it from the bottom. We talked about it earlier about using that time horizon, using your time horizon, your risk level and how much money you have and how that affects your investment, how that impacts your investment decisions. Then we talked about investing domestified where you only have in two positions, stocks and bonds and you're adding on the stocks and while you're young and you decrease your stock position, increase your bond position as you get older. Now let's get into what everybody's tuning in for. Okay, Prince, here I am. How do I build my portfolio? Rule number one, always know what you're up against. And what I mean by knowing what you're up against is knowing what is the benchmark to classify when my portfolio is doing well or not. I wrote down a couple things here, that's why I got it looking at my particular things. Number one, one step you can do to figure out what stocks to buy. Most people, they tune in to shows like this or they get headlines or whatever or buddy tell them, hey, I made some money here we kinda speculate, hey, man, you heard about this company called ABC? I made a crap ton of money off of it. Oh really? Yeah, man, it's shooting up. And I read an article that said it's gonna do even better. So you go off and buy that. That's not investing, that's speculating. So Prince, where do I start? First step, start with your job. What do you do as a job? What do you do to gain income? Maybe you may work at a bank, maybe you may work for, maybe a government contractor, maybe you work in a hospital, maybe a police officer, whatever your job may be. Maybe you may be new to a company, start there. What is your job? Or what is your level of expertise? So for prime example, if you are a nurse, or you are a nurse assistant, or you're a school teacher, or maybe a politician or whatever, start with your own job. If you work in healthcare, start in healthcare. If you work with government contracts, start with government contracts. If you work in a technology company, start with the tech companies that you know. Start with your job and your level of expertise, something that you know very well. Well, I make music. Start with, you know, very, very well, something, a brand that you interact with daily. Maybe you say, well, I'm a at-home housewife, you know, I just sit at home, I don't really do too much, and you may shop. You may know something about e-commerce, maybe Amazon, Estes, Walmart, Target, something out there that you know better than everybody, not even better than everybody else, something that you know better than everything else that you know, right? Something that you interact with every single day. Now, let's say if you're someone that says, hey, well, I know what I start with, now what's next? Now, once you know what your job is, now find that sector. Is it healthcare? Is it e-commerce? Is it retail? Is it automobile industry? Whatever, you start with the sector. Let's say if you work in healthcare. Now that you're in healthcare, now you say, well, write down three companies to say, well, three companies that you know of in healthcare that you're gonna be doing very well. Maybe you see, you work in healthcare, you're like, hey, we always buy our breathing tools from here, or we always get our oxygen trucks from here, or we always get XYZ from here or there. Use the particular things to figure out what you write down through stocks. Now, once you had all three stocks written down, now go in and say, hey, let's look at all three of these companies. Now you started with your job level expertise. You found a sector, you wrote down three stocks. Number four, find out the financials of each one of those companies. Are those companies profitable? Are they cash flow positive, cash flow negative? How much money do they have in the bank compared to the equity? You can get all this information off of sec.gov. S-E-C, security and exchange commission.gov by reading 10K reports and 10Q reports. Now, once you do that, that can now align you up to say, well, oh, wow, I like this company, I like this company. You may know the future of companies. So now you can go in and you can particularly make a position. That's the only individual part that you're looking at on your portfolio. I will always advise everybody, if you have a time horizon over five years, now you look like you qualify for stocks. I would always tell everybody the base of a portfolio should be the S&P 500 index. An index fund should at least be about 50% of your portfolio in most cases. Now, this is not all, not all, not all. I'm not telling everybody, you gotta go do this. But 50% of your portfolio at least, 50%, the more conservative you are, the more index that you put in your portfolio. Let's say if you're someone who is not conservative, you might only put 40% into your portfolio using an SPY or SWPX or whatever. Then if you use a lot of your portfolio, let's say if you're someone who's very conservative, you may say, well, I'm gonna put 60% in my portfolio. Now, the next level of the portfolio, I look at it like layers of lasagna. People are always here to say the bottom layer is an S&P 500 index fund because 90% of investors will not beat that on a consistent basis. Now that you have that, then you can look out and say, well, the next layer is gonna be what is my, what are some good companies that are very financially stable? Maybe a consumer that are very less risky. Let's risk your company is a company that have a large market cap, market capitalization that shares outstanding time. Shares outstanding times of stock price gives you the market capitalization. This is good to say how big a company is. You have a large cap, mid cap, small cap, micro cap. The smaller the company, the less likely that it can experience, can essentially go out of business. The larger the company, the less likely that it will go out of business. Let's say when we had the pandemic hit, the likelihood that a big airline like Southwest would go out of business is pretty slim versus the new small airline that just started. Catch my drift. So I will say the second layer of your design is starting with large cap companies that are household names that are profitable, pays a dividend. You look over the finances, things like that. Now, that should, I will say, depending on your portfolio, let's say if you were someone who had 50% in the index, let's say if you had 60% in the index and you do 30% into their large cap companies or whatever, and then the top part of your portfolio is the icing. Maybe 10% of your portfolio, you may get a little risky. You may be like, you know what, I always liked this cryptocurrency. I always liked this particular company. I always wanted to get involved with them. I wanted to see what they could do. Their unprofitable small company, that can take off and do something like that or whatever. I think that should be no more than 10% of your portfolio because there's a lot of speculation going on there. I always tell people, invest what you need to retire, speculate on what you can afford to lose. So let's say if you got 60% of your portfolio in the S&P 500 index, then let's say you throw in another 40%, not 40%, I mean 30% into large cap companies that pay a nice little dividend, and then you go off into the high end. The high end, less than 10% go off into your little speculative. So if you have $1,000, that's $600 going into S&P 500 index fund, $300 going to go buy a company, maybe something like a Caterpillar. And then the last 10% is something like, oh, you know, this new little small company that costs $3, $4, I wanna see if it makes it like that. Now, the thing to keep in mind, if you build a portfolio like that, you gotta keep grading yourself. You gotta look at the S&P 500 over the next three months, six months or a year. What are we doing? Is the company, is your portfolio performing good, better than the S&P 500 or not? If it's not, then you may want to look at it. You know, reevaluate that large cap company. That large cap company could be like, hey, you know what, this company is now our performing index. What is the beta? What is the beta on this company? What is it doing? Why is it not outperforming? If not, you may wanna switch to another company and your same exact sector, because you might be able to find another one that's performing a little bit better. But keeping that mileage check on what's happening and things like that, that's very crucial. But that's just to hypothetically speak. So now some people say, hey, I wanna be a little bit more risky. I don't wanna do 10%, I wanna do 15%. And don't look at, oh, my index is performing this and my large cap is doing this and my small cap is doing this. Always look at the overall portfolio. How is everything moving in unison? What good is it if my S&P 500 index fund is going up 5% but then the little small to 10% companies are just crashing left and right. So for prime example, in a $1,000 portfolio, you only throw in $100 to speculative companies, $300 to large companies, 60% of the portfolio going into the S&P 500. If you find a small company that becomes a little bit more profitable, you can increase your position in that. So that's my way of looking at it of building your portfolio. Now if you're someone who wants to do less into the index because you're more risky, you may do 40% in the index, then you may do 30% into your middle and instead of having a large cap company, you might get a mid cap. You might get a mid cap company or a small cap company which is extremely risky. You add more risk to it. Or you can just load up your fund with ETFs. Some people say, hey, you know what? S&P 500, that's gonna be the large cap. The middle of my portfolio is gonna be small cap companies. Then the top is something for me to play around with to make investment in siting because nobody wants to just get a portfolio and forget about it, everybody wants to log in. We got these phones, we got tablets, we got news coming from everywhere. We live in a society where we have too much news, too much information at our fingertips. So it makes it easier for us to wanna sell and lose sight and lose vision, all right? Well, ladies and gentlemen, that's gonna conclude today's episode. Hopefully you took something out of there with building a portfolio, looking at keeping it very simple and very conservative. Know your time horizon. One, know your time horizon. Two, knowing your risk level. Three, know how much money you have. Then using the four steps to find a stock. Looking at what is your job or your job of level of expertise. One, then going to step two, finding a sector. Is that in healthcare? Or is that in consumer discretionary? What field, is it the drink space? Maybe you work in a drink space and you know drinks very well or whatever. Or maybe you may know liquor very well, whatever the case may be. Clothing, retail, whatever that may be. Then our technology. Now you know the sector. Now you look at individual stocks. What are the top three companies that I like? And then I would take what companies I pick and then I would compare them to the top three in that sector by market cap. And then once you have that, once you find one to pick one, now you look at the financials. Look at the fundamentals. Is this a company that's growing? Is it cash flow? Has this cash flow done over the last three, four, five, 10 years? You can look this up using something like a Yahoo Finance, very good resource. E-Trade has it, TD Ameritrade has it. Or scc.gov, you can look up, is the revenue growing, is it slowing down? Looking at that balance sheet. Looking at the income statement, looking at the cash flow. Comparing all the companies, using financial profitability ratios like debt to income and things like that, right? So once you have that, once you found your stock, then that's how you could select the stock that you may want to add into the middle of your portfolio. All right, hopefully you got something out of there. Don't forget to hit that like, subscribe, comment, and share button. And as always, my name is Prince Dax. This is The Prince of Investment. And until the next video, podcast, cartoon, or whatever else craze you see me doing around the globe, peace, be safe, I'm out, thank you.