After 12 years of stock investing, I still learn a lot by immersing myself in the world of investing. Importantly, I believe one learns the most by making mistakes and investing real money in the stock market.
Self-directed investors should review their portfolios by looking closely at the underlying businesses of each stock holding but also looking at the big picture to identify the trends and see how the whole portfolio is performing.
Happy New Year! I’m writing down my stock portfolio’s New Year’s resolution. Writing this down allows me to see more clearly where I’m going, and I’ll achieve my financial goals sooner.
Particularly, I’ll focus on three components of my portfolio. Perhaps, this will inspire you to write down your own stock portfolio’s New Year’s resolution.
Buying dividend stocks
I began my investing journey as a dividend investor. Particularly, I sought dividend stocks that paid safe yields of +3%. This group consists of blue-chip stocks like RBC and Brookfield Infrastructure.
I aimed to buy stocks with safe dividends based on studying their earnings stability, payout ratio, and dividend history.
Going forward, I’ll consider dividend stocks that have estimated annualized returns of at least 12%. Oftentimes, this means that I need to wait until the stocks are relatively cheap.
For higher-yield stocks with yields in the 5-6% range, I might accept a minimum estimated total return of 10%.
Buying growth stocks
Growth stock candidates for my portfolio have estimated total returns of 12-30% per year over the next three to five years. This group of stocks pays low yields or none at all.
Last year, I took the opportunity to buy or add to Alimentation Couche-Tard and Brookfield Asset Management at attractive valuations. And I believe both will deliver these extraordinary returns.
I took care to choose growth stocks with strong track records of execution. Currently, I have about eight large-cap stocks in this category. And I will add to them opportunistically or add new candidates as I find them.
Buying small-cap stocks
Last year, I started to expand my portfolio into small- and mid-cap stocks. In 2021, I will continue to build and incorporate a small-cap portfolio as a part of my diversified stock portfolio.
One Motley Fool service, Rising Stars, which focuses on this area, really opened my eyes. The returns potential are simply too enticing to pass up.
Interestingly, I began buying small-cap stocks months before I signed up for this service. Although the service was one of the most expensive subscription services I’ve ever paid for, it’s worth every dollar, as I’m learning how to think in a framework that’s different from the stock investing I’m used to.
Moreover, I get a professional team who provides updates on the companies and alert me of new stock ideas that could be the next Amazon, Netflix, or Shopify.
I’m still learning a lot, so my New Year’s resolution for this portion of the portfolio has no specificity. All I know is that I need to hold through the volatility and buy on dips in my high-conviction ideas while keeping diversification in mind.
Are you ready to write your own stock portfolio’s New Year’s resolution?
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Kay Ng owns shares of Alimentation Couche-Tard, Amazon, Brookfield Asset Management, Brookfield Infrastructure Partners, Netflix, and Royal Bank of Canada. David Gardner owns shares of Amazon and Netflix. Tom Gardner owns shares of Netflix and Shopify. The Motley Fool owns shares of and recommends Amazon, Brookfield Asset Management, Netflix, Shopify, and Shopify. The Motley Fool recommends ALIMENTATION COUCHE-TARD INC, BROOKFIELD ASSET MANAGEMENT INC. CL.A LV, BROOKFIELD INFRA PARTNERS LP UNITS, and Brookfield Infrastructure Partners and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon.