Would really appreciate some advice or recommendations with building a portfolio from scratch.
I organized myself some self-employment work as portfolio manager and have approx. 20000 euros to play with. I dont want to jump straight in things and would rather plan everything. My first step is to do some research and write out an Investment Policy Statment to start-off between me and the “client”…
Do you guys have any recommendations or advice on matters such as where to begin, exit strategies, books to read… This is more of a question of the methods or steps you guys followed to build your own/clients portfolio!
now that i read what i wrote, maybe i didnt clarify enough… this person is close to me, made money being part of a business that got bought, and have money just sitting in the bank… after being there when I passed the CFA Level I and telling him about how i’ve been saving to build my own portfolio, he liked the idea and bascially wants to set up a way where i do research and gain asset management experience (to put on CV) and he buys the assets, and gets to invest some of his money sitting in the bank!
Im 23 and just graduated in April with a Bachelors. Industry is impossible without experience, so im trying all methods to land myself entry-level work and get noticed!
Don’t take this the wrong way, but I think it’s a terrible idea for you to manage actual money, much less someone elses.
IMO, you should study the markets for at least 2 years and develop a skill set before you invest any kind of money. Ideally longer than 2 years is good.
I know, and respect your opinion. I kind of regret bringing up the fact that money is involved because it really has nothing to do with it and ruins the whole point of this post. Just trying to get some insight from more experienced individuals. I have used many virtual simulators in the past and was told to start there… only to get into real money once i am on average positive for 6 month… Now i get the chance to partner with someone and put it to the real test and looking for some input on how you tackle it!
Yes, try to decide on a style. You don’t have enough capital to try a bunch of styles and see what works at the same time.
Usually your client determines the style, though, because they won’t give you money otherwise.
I suspect that this is just family money given to help you out. There’s nothing wrong with that, but it does put more work on your shoulders to figure out how to invest it.
This is my own bias, but the first thing to learn is position sizing and/or portfolio construction. This is your key risk control to assure that any mistake you make is not going to sink your portfolio. If you start making good investment calls, you can start to ramp up the risk, but when you are starting it is important to ensure that no mistake gets so severe that you can’t live to invest another day. Traders call this “money management” if you wanto google it. MPT people call it portfolio construction, and it’s not exactly the same, but similar enough for thes purposes.
Once you have risk under control, you can start to search for a style: value investing, growth investing, macro driven, event driven, pairs trading, etc. and see which suits you.
Also, 20k isn’t really that much money to get started. Most traders say you need at least twice that to really get started, because it is hard to overcome transaction costs, and the temptation to expose yoursel to too much risk in the hopes of a big hit is often too tempting to resist.
Put it in a low cost target date fund and call it a day. Markets are close enough to efficient that researching stocks will not yield you above risk adjusted return. I’d spend time looking at portfolio construction of low cost efts if you don’t want the target date fund. Google mean variance optimization and go at it.
On another note, tread carefully with other peoples money. Enemies are made quickly with irreparable damage.
you gotta find a strategy that suits you and one you can understand (religiously)…afterwards, you sharpen your tool set to apply the philosophy…afterwards, you make mistakes and get better…this should take a few years…becareful if you make money on your early investments as it will negative skew your confidence and perception of what it takes to make money in the markets…
your first question might be 1) are markets efficient (and to what degree)? simle question but tremendous consequences…
If it is your own money, go the whole hog, research stocks, try to find mispriced ones etc.
If it is someone else’s money (no matter how much they say “you can do what you want”) - follow CFAvMBA’s advice. Although, I don’t know how hard it is to find the European equivalent of Vanguard or State Street or some really really low cost provider of target funds. If none is available and you don’t want to or cannot convert it to USD and use Vanguard anyway; maybe you can buy a world ETF using euros or something.
great advice! Like i said, the person ill be doing it with is someone i know and we are two guys testing the ground. He is a computer-wizard and wants to try out algorithmic trading, while ill be doing more macro-level research, fundamental analysis, and managing our porftolio (a career im aiming for).
Research and your advice had me conclude the following: My lack of market knowledge, the zero-interest based economy, exposure of our low principal to transaction costs, and current market sentiment really is not attractive for us to invest for the long run. Thus, our plan now is to put part of the capital into low-cost ETFs as CFAvsMBA suggested or possible an index-fund. The remaining money will be exposed to trading on forex. This way we are liquid, can take short-term risk, and can wait for opportunities to come up. Furthermore, its a good platform to gain some insight and market experience! He will test be trying his algorithmic trading, while ill be trading normally and watching economic indicators.
One field I would like to research and invest for the long-term is in Cloud Computing for the average person. I have a feeling this is going to be pretty big in the future and want to jump aboard!
you can get on cloud computing through intel (chips for data centres), google (more internet use), ibm (servers services), dell, and problably even HP…
what about even more specific. Have you seen Amazon Web services? Heres an interesting article: http://www.nytimes.com/2012/08/28/technology/active-in-cloud-amazon-reshapes-computing.html?_r=2&ref=technology Bascially, small companies and students can lease computing to do large scale data analysis for the fraction of what it would normally cost. Google has a similar concept for its employees. With a username / password, you can get connect to thousands of computers in some location and bascially enhance your own computers capabilities…
Was just messing… My main purpose here really is to put my own thought and input… Dont really have anyone in the real world to exchange thoughts with or for others to give me feedback on my line of thought… Just look at my other post about FCF, had a major flaw in my thinking but got corrected! Not trying to be anything other then what I am… I understand im novice… But i learn best by attempting things practically and jumping straight in…
