Maintaining a well-performing portfolio necessitates finding the right balance between risk and reward, as well as diversifying across various securities. When managing my portfolio, I prioritize the following principles:
Mitigate avoidable risks #
I avoid taking on unnecessary risks in my portfolio, especially when the likelihood of a favorable outcome is low. By sidestepping avoidable risks, I aim to protect my investments and minimize potential losses.
Embrace caution and skepticism #
I approach my conclusions and beliefs with a healthy dose of skepticism. Recognizing that having a significant edge over the market is unlikely, I remain cautious and avoid overestimating my abilities. Deep-pocketed investors who dedicate substantial time and resources to seeking an edge often outperform individual investors.
Maintain minimal interference #
I adopt a hands-off approach to my portfolio, avoiding frequent trades in an attempt to time the market or achieve better returns. Instead, I rely on the services of a robo-advisor, which handles the trading decisions for my index funds, ETFs, or stocks. This removes the emotional bias and allows for a more disciplined and objective investment strategy.
Avoid major mistakes #
While it may seem obvious, it is crucial to prioritize avoiding significant mistakes in investment decisions. Rather than chasing elusive edges that may not exist, I focus on making informed and rational choices. Often, refraining from taking unnecessary actions and staying the course can lead to better returns over time.
By adhering to these principles, I strive to maintain a well-balanced portfolio that maximizes potential returns while minimizing unnecessary risks and costly mistakes. Building a solid foundation for long-term growth and stability is key to achieving my investment goals.
