Portfolio Management for New Investors

This article is the first in a series of articles about portfolio management for new investors. If you have not already, I suggest you read my articles on business valuation, idea generation, and idea management systems before continuing on with this topic.

Portfolio management is where a lot of new investors get themselves in trouble. When you are first starting out, you should be ultra conservative in making portfolio decisions as you still have a ton of lessons to learn in the stock market.

Portfolio management consists largely of the following five activities:

· Capital allocation across ideas

· Position sizing

· Buying programs

· Sell disciplines

· Correlation management

I'll briefly discuss each of these activities and then will recommend some learning resources for you to check out about those topics.

Capital allocation across ideas answers the question of WHAT to buy

In this article about capital allocation, I walk you through some of the key concepts of capital allocation: opportunity cost, taking advantage of demographic and economic trends, margin of safety, cash allocation, and breaking your portfolio into different strategies.

Position sizing answers HOW MUCH to buy for one position

Everyone is at a different starting place when they decide to start managing their own money. This article on how to size your investment positions discuss the calculation you should do before you create your buying programs.

Your buying program answers the question WHEN to buy and how much to buy each time

A buying program is an explicitly calculated program or purchases spread out over at least a year. This article on how to create buying programs will walk you through the reasoning behind the time-frame of a year, and how that plays into your sizing calculations.

Developing and incorporating your sell disciplines will answer the question of WHEN TO SELL

Sell disciplines are the most common portfolio management factor that people forget to put into place when they enter a position. You should never enter a position without knowing why and when you would sell. You can read the article I wrote on sell disciplines and when to get out of a position for more information.

Managing portfolio correlation does not have to be a huge project

Understanding a few simple things about the companies you are investing in will help you spot correlations without doing a single bit of math. Check out the article I wrote on practical advice for managing correlations in your investment portfolio.


Portfolio management is it's own animal. It's a set of skills that you will need to study and add to your toolkit, and it's the last chance to keep from making investing errors.

About the Author

Jeremy Scott Bailey is an investor, author, entrepreneur and host of the "What Works In Investing?" podcast now available on iTunes. He is founder and Chief Investment Officer of Burgeón Group, Inc. an investment advisory firm that provides portfolio management services to families and individuals.

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