Developing Your Portfolio Framework: Priorities

I’ve been laying out the content generation strategy for this blog. Why? Because the Internet is a vast wasteland of disorganized information and analysis. What you don’t need is more of that. This blog is not about providing stock picks. This blog is not about company analysis. And only occasionally, will I discuss thematic investing. It is my opinion that this is not fruitful for you. However, I can be of value elsewhere on your journey. I am going to provide you with something original.

What we need to develop—together—is a framework. This framework needs to build upon the new rules. The rules are different today because the players are different. High frequency trading, algorithmic formulas, and the ubiquity of information has sensationalized limitless possibilities within the investment arena. In this arena we are out of our league; the game favors our opponent. But we will discuss this more in depth at a later time.

I’ve created the following to help you visualize our priorities:

Priorities: Risk and Portfolio Dynamic

It’s simple: risk management before return, portfolio dynamic before investment selection. As if everyone hasn’t already jumped on the “risk management” bandwagon, this first goal is obvious. But here’s where this strategy becomes counterintuitive: investment selection is irrelevant in our arena.

I will leave you with this comparison: what separates the great poker players from everyone else is not the hands they are dealt—because everyone is dealt the same (eventually).  Rather, it is the strategy, as a whole, that determines good from great.

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