Investment Process

I use a three level Investment Process.

LEVEL 1: ASSET ALLOCATION

There are four main assets classes in which I invest:

  • Stocks;
  • Bonds;
  • Cash; and
  • Commodities, such as gold.

Asset allocation is the act of deciding how much money, as a percentage of my total portfolio’s value, to invest in each asset class.

Once per quarter I will make my asset allocation decision based upon:

  • My Investment Policy;
  • My investing objectives (e.g. when will I need to withdraw the money?); and
  • Long-term market trends (e.g. major stock and bond fundamentals and technicals).

LEVEL 2: CORE POSITIONS

There are thousands of publicly traded stocks in North America, and thousands more in other regions of the world. Establishing core positions is the act of picking stocks in which to invest.

Once per quarter I will make identify my core positions based upon:

There is no upper or lower limit to the number of core positions, but keeping only a handful (5 to 10) of stocks minimizes trading fees while providing some diversification, and keeping the number low allows me to spend adequate time on their management.

LEVEL 3: TRADING AROUND

Once I have established my core positions I will trade around them: buy when they fall and sell when they rise (buy low and sell high).  This allows me to maximize the profit from my core positions.  The method is simple.

  • When a stock falls X% from the price at which I last traded I will buy $Y worth
  • When a stock rises X% from the price at which I last traded I will sell $Y worth

Every day I will monitor prices of my core positions and trade based upon:

  • My Asset Allocation decision, which tells me how much I can invest in stocks in total; and
  • The rise and fall of prices of my core positions.
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