I will split this lesson in two parts:

1) A general stock portfolio structure template

2) Strategic stock portfolio allocation

Module 3 - Chapter 2 - Lesson 10 - Structure of a stock portfolio - Kopie

1) General stock portfolio structure template

Let's start first with "diversification".

Unlike ETFs that are per se very diversified, you have to take diversification into your own hands when you invest in individual stocks and REITs

When compiling an individual stock portfolio, it is essentially important to select quality stocks from different industry sectors and different geographical regions.

This is in order to avoid any one-sided dependencies from a specific sector or region.

Within an industry sector and within a region, there are high levels of correlation between stocks, so these circumstances must be tackled. ---> NOCH PRÄZISIEREN !!!!!!!

If your entire capital is invested in one individual stock, the investment depends 100% on the performance of that one stock. If its stock price falls sharply, the value of the investment is reduced accordingly.

However, if you divide your available capital among several stocks, an underperformance of just one or two stocks no longer has such a large influence on the overall value development of the stock portfolio.

The risk of loss is reduced by diversification.

Imho, a portfolio of 20 to maximum 25 individual stocks (value, growth, and one or two REITs) provides a very good level of diversification.

But of course, this comes at a certain kind of price. Analyzing and evaluating a stock requires quite some time.

Now with up to 25 stocks, you will definitely have some time to spend for the selection process - this is not to be underestimated!

Just to remind you of my initial recommendation earlier: If your agenda does not allow that much time for targeted stock investments, you are better off with ETFs. No worries.

Nevertheless, I would generally encourage you go for (high-quality) stocks as well because you have the full control on which industries and regions you want to have in your portfolio.

This is not the case with ETFs (where you buy the good AND the bad companies in one index).

You don't need to go all-in immediately if you feel like investing in stocks.

Just take as much time as you need, become experienced and build up your stock portfolio step by step without any rush.

In the picture above, we have just a simple example on how a diversified portfolio of stocks could look like.

We have following main categories:

Industry
Non-cyclical Consumption
Cyclical Consumption
Healthcare
Finance
Technology

And now we break those categories down to different sectors.

Starting with Industry where we have: Industrial Goods, Collercial Services and Transport/Logistics. Within each of these three sectors, we can select one or more stocks to purchase.
Same procedure for Non-Cyclical Consumption where we have the sectors Household, Hygiene, Food and Beverages
For Cyclical Consumption, we have Textile, Utility Goods, Restaurants, Travel and Automotive.
For the Healthcare category, we have Medical Technology and Pharma as sectors.
The Finance category contains Financial Services, Real Estate Investment Trusts (REITs) and Banks as sectors.
And to conclude, for Technology, we consider Software/IT, Services, Communication and Semiconductors as categories.

Generally speaking, if you find respective stocks of high quality, I would recommend to try buying companies whose products or services you are using by yourself in your daily life.

Of course, only if you feel like doing so.

M6-C2-L3 ValueGrowth Stocks & REITs - Portfolio compilation (examples)

2) Strategic stock portfolio allocation

Also in the case of stocks, it is crucial to conduct a strategic portfolio allocation.

As previously mentioned, I would recommend to go for an approach that takes into account securities...

as a source of income
as well as a source of returns.

As a CORE investment, I would advise to select undervalued value stocks...

... that pay out dividends (source of income + returns)
... that are just source of returns (some companies do not pay out dividends)

Against this background, let's recap that is is rather unfavourable to have too many stocks in your portfolio.

Maximum 20 to 25 individual stock titles are enough for your portfolio (unless you commit your life to stocks 24/7 🙂).

For this purpose, I would recommend to choose in initial allocation of:

15 - 20 undervalued value stocks - with dividend payouts (source of income) or without dividend payouts (= "just" a source of returns then).

As regards your voluntary/complementary SATELLITE investment, you could opt to invest in growth stocks and individual REITs.

However, please be aware again that growth stocks usually have higher return prospects but also higher risks.

For this reason, I would advise to invest in a set of:

up to 5 growth stocks (maximum)
up to 2 REITs

All above mentioned numbers are just guidelines/recommendations from my side for orientation.

Value/Growth Stocks and REITs: Portfolio compilation (examples)

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Module 1: Wealth creation - the big picture

Chapter 1: What is the overall purpose of this online course?

Chapter 2: "Wealth creation = Raising income + Investing"

Chapter 3: Building your personal financial infrastructure

Chapter 4: What type of investor are you?

Chapter 5: Investment Mindset

Chapter 6: Tracking my investment philosophy

Module 2: Investing in Equity ETFs & REIT ETFs

Chapter 1: Intro

Chapter 2: Objective ETF selection criteria

Chapter 3: Subjective ETF selection criteria

Chapter 4: Using ETF screeners for your search

[work in progress] Chapter 5: Live simulation... let’s buy ETFs together!

Module 3: Investing in Value Stocks

Chapter 1: Intro

Chapter 2: Fundamental Analysis (Step 1) - Pre-screening

Chapter 3: Fundamental Analysis (Step 2) - Qualitative Criteria

Chapter 4: Fundamental Analysis (Step 3) - Quantitative criteria

Chapter 5: Fundamental Analysis (Step 4) - Fair Value and investment decision

[work in progress] Chapter 6: Live simulation... let’s buy value stocks together!

[in planning stage] BONUS: Value stock analysis with AI/prompt engineering

Module 4: Investing in Growth Stocks

Chapter 1: Intro

Chapter 3: Fundamental Analysis (Step 2) - Qualitative Criteria

Chapter 4: Fundamental Analysis (Step 3) - Quantitative criteria

[work in progress] Chapter 6: Live simulation... let’s buy growth stocks together!

[in planning stage] BONUS - Chapter 7: Growth stock analysis with AI/prompt engineering

Module 5: Investing in REITs

Chapter 1: Intro

Chapter 3: Fundamental Analysis (Step 2) - Qualitative Criteria

Chapter 4: Fundamental Analysis (Step 3) - Quantitative criteria

[work in progress] Chapter 6: Live simulation... let’s buy REITs together!

[in planning stage] BONUS - Chapter 7: REITs analysis with AI/prompt engineering

Module 6: Your personal investment management

Chapter 1: Investment strategies

Chapter 2: Portfolio compilation

Chapter 3: Situation management

[work in progress] ADD-ON MATERIAL

[in preparation] How to read balance sheets, income statemtents and cash flow statements

[in planning stage] How to monitor macroeconomic developments