How to construct InvestingNote Portfolio
Dear Members of INP,
Before committing assets to any strategy, it is important to fully understand the process. This page is written to give you key information needed before implementing our strategy with your portfolio. Although no strategy is perfect, we believe you will find that InvestingNote Portfolio (INP) will provide you with the opportunities for income and growth, protection from severe losses, and flexibility to meet your financial objectives.
InvestingNote Portfolio adheres to the investing philosophy espoused by The Joyful Investors. Furthermore, here are additional considerations we keep in mind throughout our investment process:
1. High conviction security selection
Our subscription service focuses on selecting stocks that we deem to possess quality and stability at appealing prices. Emphasizing these attributes aims to foster a more favorable performance trajectory. Quality is anticipated to yield greater long-term growth potential, while stability can enhance protection against short-term turbulence in the markets. While the portfolio may occasionally not fully capitalize on market upswings, it should offer enhanced capital preservation during downturns. Throughout a complete market cycle, we anticipate these performance patterns to yield robust returns.
When assembling a portfolio, there’s no rush to acquire all these companies at once. We’ll demonstrate our approach to acquiring them when these stocks reach compelling values that capture our attention. As market cycles evolve, investors may also choose to reallocate their capital and utilize new or ongoing funds for subsequent investment opportunities.
2. Invest new money regularly and buy in tranches
The presence of liquidity for investment permits you to incorporate new stocks into your portfolio without the need to sell off current holdings. Regularly allocating portions of your paycheck, even in modest amounts, has the potential to trigger a compounding effect for your portfolio. This compounding effect, akin to a snowball gaining size and speed as it rolls downhill, continues to gather momentum and expand over time.
In addition, we refrain from fully committing to any position all at once. Generally, we enter a full position in a stock after making 3-4 separate purchases, with each tranche potentially differing in size based on the attractiveness of the opportunity. When investing in stocks, we possess the conviction to lower our average cost by buying more when the price moves against us, as this is expected to occur.
3. Cash is king (for seizing opportunities)
We do maintain a cash position, contrary to the misconception that holding cash is a cardinal sin and that all available funds should be invested in the markets continuously. Market movements are not linear; thus, it’s crucial to have reserves for unforeseen circumstances and to capitalize on opportunities when they arise.
In the process of constructing an investment portfolio, cash assumes a significant role. It serves as a buffer, a tactical asset, and a source of opportunity. Strategically allocating cash within a portfolio offers liquidity, ensuring funds are readily accessible to take advantage of investment opportunities during market downturns.
This liquidity enables us to retain financial flexibility, allowing us to leverage market volatility or capitalize on undervalued assets without resorting to selling other holdings at unfavorable times. For INP, we adjust our cash levels by weighing the benefits of liquidity and stability against the need for potential returns, emphasizing the importance of crafting a well-diversified and resilient investment portfolio.
4. Target long term returns and hold through market volatility
Sometimes it can take some time for the investment thesis to play out. In the short time, stock prices are influenced by market noises and sentiment, In the long term it follows earnings. A longer time horizon for building wealth allows more time for companies to work on your behalf as a shareholder.
When taking a position on any stock, we are recommending that the investment time horizon should be for a minimum of 5 years. We should only be investing in money that we won’t need in the short term. For many of the stocks offered by our services, we’re also investing our own money for the long term.
When we initiate a position through technical analysis, it doesn’t guarantee an immediate price increase. Our proprietary methodology serves as a risk management tool, helping to identify optimal prices based on risk-to-reward outcomes. If the pullback persists, we seek other optimal prices to average down. During crises, fundamentally sound stocks commonly retrace significantly, an expected part of our portfolio construction process. Solid companies may encounter temporary headwinds or see their stock prices decline due to broader market movements.
The key thing is to be able to build a portfolio that is antifragile. Such an investment portfolio not only survives but thrives when exposed to volatility and disorder. Our systematic approach to investing, which seeks high-upside and low-downside outcomes, is best designed for this purpose. We leverage on adversity to enhance our performance.
Let’s build wealth, together joyfully
We firmly believe that by buying great stocks at attractive prices and dedicating ourselves to long-term ownership, we position ourselves to attain financial freedom. Our methodology is suited to today’s uncertain environment and allows you to enjoy a smoother pattern of returns. Embrace our investment principles and embark on a journey to enjoy financial success together.
Our goal is to make you richer, wiser, and happier.
To your success,
Kathy
CIO, The Joyful Investors