Portfolio construction
My portfolio is deliberately designed to suit my strengths and weaknesses:
I am good at not interrupting compounding in great companies that I know well, and I want to concentrate my capital in a few of these.
I am also good at adding to stocks I know well when the market offers a real opportunity, but…
…unfortunately I am not good at following stocks I don’t own.
My portfolio is therefore concentrated with a long tail. The allocations aren’t fixed, but as a rule:
50-60% of my portfolio is in around 5 high conviction “core” stocks. Generally turnover in this bucket is low; these are compounders with excellent management which I know well and want to own forever at the right price.
25-35% of my portfolio is in around 10 “trades” that have been “promoted” out of the tracker basket when the price is right, and that offer strong returns on a 3-10 year view.
5% of my portfolio is in up to 50 “trackers”. These stocks all have some characteristic of a good investment: a deep moat, exceptional management, good growth through cycles, and/or apparent value. I expect this basket to produce healthy compounded returns, but more importantly, from time to time, a member of this basket will present an exceptional opportunity.
10% of my portfolio is in private investments.