Finances

FUN STOCKS PORTFOLIO™ – HOW TO BUILD YOUR OWN

Many of our subscribers have requested that we show them how they can construct their own Fun Stocks Portfolio™. In this blog, we will show you three simple methods to build your own Fun Stocks Portfolio™ with very low costs. There will not be any annual or ongoing mutual fund management fees, financial planning fees, high investment advisor fees, or high commissions. The only costs are the transaction or small brokerage commissions ($4.95 or $7.95/trade) that you pay for each trade made through a discount broker of your choice. InvestBetterSpendSmarter.com (IBSS) receives no compensation for our service, because we believe in giving you the smartest tools for free to help you self-manage your money.

Our goal is to help you join the “Manage My Own Money Movement.”

CAUTION: Your Fun Stocks Portfolio™ should not be the your only investment vehicle; it should be in the Aggressive Growth or Growth with Value portion of your overall investment portfolio plans.

How to Build Your Own Fun Stocks Portfolio™ – Overview

Step 1 – Use IRA or taxable funds to open a brokerage account at your online discount broker of choice (ETRADE.comFidelity.comInteractivebrokers.comMerrilledge.comSchwab.comScottrade.comSharebuilder.comTDAmeritrade.comUSAA.comVanguard.com, etc.). IBSS is not a brokerage firm, so we have no accounts. Be sure to note the trade transaction commission charged by your broker and include it in your calculations.

Step 2 – Decide the amount you plan to allocate to your Fun Stocks Portfolio. You should treat your Fun Stocks Portfolioas a growth portfolio or as a portion of your total growth portfolio.

Step 3 – Depending on the amount of time you are willing to commit and the risk you are willing to take with your Fun Stocks Portfolio, choose one of the 2 methods below to use to construct your Fun Stocks Portfolio.Invest wisely

Step 4 – Subscribe to our free InvestBetterSpendSmarter.com blog (see top of page), follow our Fun Stocks Watchlist, and track our current comments for each of the companies on our Fun Stocks Watchlist. As appropriate we will change the list by adding or subtracting “candidates” from time to time.

Step 5 – Monitor your Fun Stocks Portfolio™ ideally on a weekly basis, but at least once a month. Given that you should treat this as a long-term investment, you should not need to make active trades in the stocks of your Fun Stocks Portfolio.

Methods – Choose one of these methods after Step 2 above:

Method 1 (Equal Share Approach) – If you have limited investment dollars or want to own shares in fewer companies, choose several from among the companies on our Fun Stocks Watchlist™ that you believe will continue to outperform the S&P 500 and do well in the long-term. Conduct your research and due diligence using the research tools that are available through your discount broker (for example, annual reports, analyst reports, etc.) or through other research sources such as Money.MSN.com. To reduce some risk with a minimum level of diversification, purchase the shares of at least 10 companies from our Fun Stocks Watchlist™   and hold them for a long time (for example, 1-5 years or more). Add to these holdings as you monitor their business progress. Buy the same number of shares for each company so you can aoid any hard decisions that require more analysis. You now have a nice Fun Stocks Portfolio™ of your own. Track your progress frequently (at a minimum, monthly).

Method 2 (Equal dollar Approach) – You decide the amount of investment dollars that should be invested in your Fun Stocks Portfolio™ and divide that amount equally among the companies you choose for your Fun Stocks Portfolio™. If there are 15 stocks in your Fun Stocks Portfolio™, one company would equal 6.67% of the total amount of your planned investment portfolio. Therefore you should simply invest 6.67% of your total dollar amount in each of the 15 Fun Stocks. For example: If you are investing $20,000 into your Fun Stocks Portfolio™, you should buy $1334.00 of Disney stock and $1334.00 of stock in each of the remaining 14 companies in our Fun Stocks Portfolio™. This method is easy to execute and may be the least risky of the two methods. You may have to round out and adjust some share amounts, because you cannot buy a fraction of a share.

The Potential Risks

Method 1 requires that you focus on only 10 companies, subjecting you to the higher risk of a concentrated portfolio. In general, the more companies you own, the lower the risk.

Method 2 applies an equal dollar amount to the diversified group of 15 companies so that a few stocks do not distort the risks and make the overall portfolio riskier. However, method 2 will not reward you as much if a few stocks continue to outperform the rest and you own a smaller number of their shares. In investing there are tradeoffs between the risks you take and the rewards you may receive.

Lowering your risks – Averaging is one way to lower your risk. You can use averaging with both methods. With the amount that you plan to invest into your own Fun Stocks Portfolio™, divide it into 4 equal parts and invest each part over 4 separate periods. The periods can be 4 weeks, 4 months, or 4 quarters. Make sure you invest an equal amount of money regardless of the prices of the stocks. Using this risk moderation technique, you avoid having to make decisions about the prices of the stocks and their volatility.

An Easy Alternative Method: Follow Invest Better Spend Smarter’s (IBSS) Stock Picks

As you may have noticed, IBSS will share Stock Picks from time to time. Most of these Stock Picks will come from IBSS’s Fun Stocks Watchlist, because we follow all of them closely and track their potential to generate profits. There you can easily construct you own Fun Stocks Portfolio™ by buying (or selling) the Stocks Pick that IBSS will announce next. This allows you to use our research in addition to any research that you may conduct on your own. You can then make your purchases using the equal shares method (Method 1) or the equal dollar amounts method (Method 2) described above.

Enjoy Owning These Businesses

No matter which of the methods you use to build your own Fun Stocks Portfolio™, you can enjoy owning these companies and knowing that the next time you spend money on the products or services of any of these companies (Netflix, Disney, Priceline, Comcast, Mattel, etc.), you are contributing to their profits, which can also benefit you.

Have fun investing!

Jim Tso


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Jim Tso wants to “give back” and share his 35+ years of successful personal money management experience to help others to achieve their financial goals. Jim created this InvestBetterSpendSmarter blog (IBSS) to provide you with free investing, planning, savings, retirement, and inspirational tips derived from his unique, innovative, and proven approaches to money management. He welcomes and appreciates your feedback.

Jim would also appreciate it if you would kindly share our IBSS website and blogs with your family, friends, and business associates. Thank you!

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