How to Create Your Investment Portfolio

Written by 
Polina Medianina
/
August 27, 2021

Answer: Samsung

Hover your cursor over the buildings and look at the connections between the companies
⬇️

correct investment portfolio photo

Today we are going to analyze your portfolio of 2-3 stocks that I asked you to pick. If you haven’t had a chance to do it yet, go to Gainy.app and pick any two stocks.

Сreate a portfolio with best stocks specifically for you for free

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let's start with the following question:

Why did you choose those companies to begin with?

 Were they the first ones that you found in the app? Did your friend recommend them to you? Or did you like their growing chart? 

None of these are correct approaches because they are emotional rather than rational. And in money management rationality and systematic approach are key to stable earnings. 

The first step in choosing stocks is actually setting a goal. Goals can be divided into 2 groups.
Long term. Eg. saving for retirement, education for kids.
Short term. Eg. saving money to buy a house or a car.

Once you set a goal, let's calculate the expected result. 

For example, I want to have $500,000 for retirement, which I plan to have in 20 years and I put all the details into an investment calculator. It shows that with my initial capital of $10,000 I will have $429,000 in 20 years. 

N.B. I used the 15% return rate, which is what a conservative investment into the S&P 500 index would yield on average.
Try and modify numbers to find suitable options. In my case the return rate of 17% will give me a desirable result. Now I understand that investing in the index alone is not the only option. I need to pick some individual stocks that would bring me higher yield.

The higher your desired yield, the higher the share of stocks in your portfolio needs to be. 

For example, if I need 17% yield, 40-50% of my portfolio will be in stocks, and I can keep the rest in bonds and ETFs.
If you want 20-25% yield, then the share of stocks needs to be 60-70%
If you want an even higher yield, then the share of stocks should be up to 100%. 

🌚How much risk can I take?  

Gainy helps you find the answer to this with a simple question when you start using the app.

Find it out after the test on your risk profile at Gainy.

Please take the test later, and remember:

  • if you have low risk tolerance it is better to invest long term and in safe instruments like ETFs, value stocks and bonds. Don’t expect high returns the next day and don’t bother checking the account every week—you won’t notice any dramatic changes. 
  • If you have high risk tolerance, don’t go all in. Start with little sums of money, lock in profits and buy new stocks with these profits.  

To be on the safe side, start with conservative assets and modify them. 

Also, it’s good practice to separate accounts for your conservative or moderate portfolio and your aggressive one. Otherwise, emotions from aggressive trading on one account can affect your long-term strategy. 

How? 

Imagine you bought some company’s stock because you liked the company, it’s fundamentally strong and you want to hold it long term. And you also bought the Tesla stock which goes up and down by 100%. 

The first company grows like this and you just hold it.

company chart stocks photo

Tesla grows like this. You buy the dip and sell at peaks. It’s very volatile. 

tesla volatility trading strategy photo

One day you look at your company stock and think that it grew too much and expect it to fall (like Tesla is swinging). So you sell the stocks hoping to buy them cheaper. 

chart trading strategy photo

In reality, it had a 2-5% decline and went further up. There was no point in trading with this company’s stock.

trading investment strategy photo
When choosing a stock, decide in advance whether it’s a long- or short-term investment for you and set a time limit or % of upside when to sell the stock. Stick to your decisions.

As for your portfolio, make a decision whether these two companies are a long-term or short-term deal. Think about their business and have a look at the charts for those stocks. Is it a hype business or a stable one? Do they have very volatile charts with high rises and steep declines or is it quite smooth?

If you want to lose money, try some of the following:

  • You are not sure how the companies make money
  • Pick companies that are surrounded with negative context
  • Use a broker with low rating and bad reviews (check out the best ones here)
  • One of these companies is Tesla :)
  • Pick companies showing a long-term downward trend(to see this, find the company in Gainy and click the 5Y period on the chart)

If none of these apply to you, then we can move forward and analyze stocks deeper.

Don’t forget to take a risk test in Gainy before buying anything. Depending on your results, our algorithm developed by a team of experienced investors, will recommend you best, safest stocks to start with.

Keep in mind the stocks you picked yourself and those that Gainy recommended and get ready for a dive into stock analysis. Next time we’ll begin assessing companies like adults.. 

drown information overload photo

See you,
P.

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because I want to check what my friend has just sent me
The company developed and maintains technological products and services, namely Snapchat, Spectacles, and Bitmoji. Snapchat is the third most popular app among millennials and gets high profits from ads on the platform. Since TikTok is not available to invest in yet, Facebook is boring, we see Snap as a good choice to diversify your portfolio. We don’t know what keeps those kids so glued to screens in Snapchat but if companies profit from it, we can get a share thanks to investing in their stocks.
because xBox brings us together with friends
Microsoft is the second biggest company on the market in terms of capitalization. Xbox, Skype, Windows Office 365 are all part of Microsoft business as well as it develops, licenses, and supports a wide range of software products and services, as well as designs and sells hardware. The company’s future is as bright as it’s past with all the money the company invests in disruptive tools like AI. Next time you plan to buy another game for the Xbox console, you might also consider buying a Microsoft stock which is not very expensive.
because we want schools to be cooler
So we packed peanut butter and jelly sandwiches for the kids, now it’s time to go to school. The K12 Inc. is an educational technology company. The company offers a private education program, software and education services built to teach online for preschool students up to grade 12 or K-12. The company’s earnings soared up after the pandemic because we came to realise that online learning is not far in the future and may continue the trend.
because we like to treat our pets and ourselves, too
The American manufacturer of supermarket food JM Smucker Co also operates a pet food business including brands such as Milk-Bone and Meow Mix. It’s also the producer of the peanut butter JIF, kid’s all-time favorite filling. The company offers a 2.96% dividend yield and in the third quarter reported a 7% increase in net sales.
because we love playing games
If there is one game to teach you financial literacy - it’s Monopoly, which belongs to Hasbro, as well as unparalleled portfolio of approximately 1,500 brands including MAGIC: THE GATHERING, NERF, MY LITTLE PONY, TRANSFORMERS, PLAY-DOH, BABY ALIVE, DUNGEONS & DRAGONS, POWER RANGERS, PEPPA PIG and PJ MASKS, as well as premier partner brands. The company generates strong cash flows and pays regular dividends. The company’s business moves along the online trend and develops digital content in the form of TV shows, films, computer games.
because everyone has a favorite childhood hero
Disney is a widely diversified company which owns everything from toys to apparel, and books to video games: Disney Parks, ESPN channel, Pixar, Hulu and so much more. And now it bets on streaming services with Disney+ and threatens Netflix’s market share. The company revenue suffered a major drop last year due to closure of Disneylands, but has opened them in October and foresees a strong comeback.
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