PRISM: Prioritizing Your Goals

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  • 1.  Selecting and Managing Your Investments - Lesson 1

    Posted 03-03-2022 16:54
    Edited by Jenna Brashear 03-03-2022 17:02

    Overview 

    Welcome to the first lesson of "S" in the PRISM Academy - Selecting and Managing Your Investments. "S" of the PRISM process uses your wealth-building plan to select investments appropriate for your portfolio.  

    In this step, you learn how your allocation and preferences guide the choice of which investments to buy and hold. You then learn how to create buy and sell rules for stocks, bonds, mutual funds and exchange-traded funds (ETFs). You'll use these rules to determine which investments should go into your portfolio and which ones should be removed. 

    This course will focus primarily on: 

    • How your investment management preferences and asset allocation play major roles in how you select securities for your portfolio 
    • How to select mutual funds/ETFs, stocks as well as bonds that fit your individual needs 
    • How to choose between value, momentum, growth and dividend stocks 
    • The benefits and risks of bonds versus bond funds 
    • The importance of writing down and finalizing your buy/sell rules 
    • And so much more! 

    So let's get started! 

    Reflect 

    We will take what we've learned in the last two portions of the course: asset allocation and individual preferences to determine which securities we want to add to our portfolio. So, make sure to reflect on your notes or worksheets from these two portions of the PRISM Academy. 

    As we continue to highlight, the PRISM Wealth-Building Process is a cyclical process that illustrates the building blocks of this online course. Each section of the course is dependent on the other, meaning one step must be complete before moving onto the next, and a change at the top or bottom can lead to a comprehensive review. Therefore, you can use the PRISM process time and time again to help you stay focused on funding your financial goals.   

    Participate 

    Review the worksheet (linked at the bottom of this post), watch the video lesson and answer these three questions in the discussion below: 

    1. What allocation model did you choose back in Step 2: "R" - Recognizing Your Risk Tolerance and Allocation? 
    2. Which asset class groups do you need to find investments for? (Ex. Large-cap stocks, intermediate-term bonds, etc. 
    3. Optional: What is one aspect of selecting investments you are unsure about or need more clarity on? 

        Discussion Example 

        1. In Step 2: "R", I chose an aggressive allocation model which indicated that I should focus on having 10% Fixed Income and 90% Diversified Stock. The suggested breakdown using the AAII Allocation Models is:
          1. 20% Large-Cap Stocks 
          2. 20% Mid-Cap Stocks 
          3. 20% Small-Cap Stocks 
          4. 20% International Stocks 
          5. 10% Emerging Markets Stocks 
          6. 10% Intermediate Bonds 
          7. 0% Short-Term Bonds 
        2. Right now, I should focus on finding a few international, emerging market and intermediate bonds to fill in my portfolio with. 
        3. One aspect I am looking forward to get more clarity on is bonds as a whole, I am just learning about intermediate-term bonds and want to know what benefit it can bring to my portfolio, especially in a volatile market and economy. 

        View and download the "Selecting and Managing Your Investments" worksheet 

        Questions about coursework, webinars, worksheets, etc.? Drop your inquiries in the discussion below. We're happy to help! 



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        Jenna Brashear
        AAII Community Manager
        Chicago, IL
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      1. 2.  RE: Selecting and Managing Your Investments - Lesson 1

        Posted 02-22-2023 11:22

        1. What allocation model did you choose back in Step 2: "R" - Recognizing Your Risk Tolerance and Allocation? 

         I chose a custom portfolio and called it "High Moderate".  Here's my thinking. Since my pension plus my wife's social security will cover most of our expenses I don't need to have 40% of my money in bonds, but I don't want to be 90% invested in stocks either.  So using the Moderate Investor model I am reducing my bond exposure, upping my stock exposure, and adding a real estate asset class (my "cowboy account").

        It looks like this:

         

          1. 21% Large-Cap Stocks 

          2. 20% Mid-Cap Stocks 

          3. 15% Small-Cap Stocks 

          4. 10% International Stocks 

          5.   0% Emerging Markets Stocks 

          6. 15% Intermediate Bonds 

          7.   5% Short-Term Bonds

          8. 10% Real Estate - (Cowboy Account)

          9.   4% Cash 

        1. Which asset class groups do you need to find investments for? (Ex. Large-cap stocks, intermediate-term bonds, etc.

        I will screen all asset groups for investment.  If my current holdings pass the muster then I'll keep them, if not I'll replace them.

         

        1. What is one aspect of selecting investments you are unsure about or need more clarity on? 

        Bonds.  Ugh.   But yeah, bonds.



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        RICHARD
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        Original Message