What is a Portfolio?
A portfolio encompasses all your investments across all accounts. This includes brokerage accounts, retirement accounts, savings, and any other financial assets. Viewing your investments as a single portfolio rather than separate accounts enables better asset allocation decisions. A well-constructed portfolio balances growth potential with risk management.
Portfolio Construction
The core-satellite approach uses low-cost index funds as the core (70-80% of the portfolio) with selective active positions as satellites. A three-fund portfolio of domestic stocks, international stocks, and bonds provides comprehensive diversification with minimal complexity. The specific allocation depends on your age, goals, and risk tolerance.
Key Considerations
The biggest portfolio mistake is not having a plan. Without a written investment policy statement defining your target allocation and rebalancing rules, emotional decisions during market stress can destroy long-term returns. Keep your portfolio as simple as possible - complexity rarely improves outcomes for individual investors.