Chapter
8
Building a Portfolio
In This Chapter
• The importance of asset allocation
• The roles of fixed income and cash
• The way to match your portfolio to your goals and risk tolerance
• The way to build an aggressive, a moderate, or a conservative portfolio
You absolutely need a plan for buying and selling stocks; however, each of those decisions should fit into a broader plan for your entire portfolio. Buying individual companies is the way to find great stocks, but how those stocks fit into your total holdings is as important as the stocks you buy. When you take the idea of core, growth, and value stocks and combine them with small, mid, and large sizes, you quickly see there are many possible combinations. Layered on top of those choices are the industrial sectors every company belongs to and you have many possible outcomes. Making sense of all of these possible combinations is the plan you build for a portfolio that fits your financial goals and risk tolerance. That plan, called asset allocation, helps you weather the volatility of the stock market and avoid some of the risks.