Building a ‘rock-solid’ portfolio

In these difficult times where transparency and trust alongside consistent returns are hard to find it will be refreshing to know that your search can stop here. This ‘rock solid’ strategy has no smart trickery only hard-nosed common sense analysis wrapped in a safety net risk controls.

Building a portfolio profile with a strong group of up trending stocks takes time, patience and discipline. The many common sense assessments I use of stock behaviour, such as where they are in their stock cycle, is important to building a ‘high odds’ case for engagement. This simplistic price approach cuts through a lot of distractive and confusing rubbish.

Many of the old market strategies in this day and age are broken, out-dated, and fallible. Markets are deadly so systematic market engagement is essential. Falling short of market expectations can prove dire and blue chip stocks like TLS must have share prices monitored closely to ensure you are not at risk. That’s what I do protect your capital. There are many examples of leading stocks taking unexpected dives. They all do it at some point and if you own TLS it is like having your own mini GFC at the moment. The smart thing to do is protect your capital before these disasters occur and on the flip side learn how to ride the big and profitable trends higher like CSL. This is a must if you are to survive the shark-infested waters of the stock market.

My market trading strategy uses risk control based on price behaviour. It builds into your stock trading a systematic safety net process that won’t allow you to be exposed to price collapses like AMP or TLS. Any losses are restricted to a predetermined amount. This is absolutely essential for survival as a stock investor and creates that ‘rock solid’ aspect of your portfolio. Remember the price is always right no matter what you think. It is the price we base our profits and losses on. It doesn’t matter if you think you’re right and the price goes down – you lose.

Fundamental analysis has not only proven as being ‘behind the game’ but the assent of the activist short sellers is now calling to task companies who inflate their (fundamental) projections and this has been a refreshing call to arms. These companies get away with it because brokers pander to company’s whims through their research and independent auditors endorse suspect valuations. They survive on lucrative fees not share price movement. We do rely on share prices and thus shouldn’t rely on these biased sources anymore. This is the new world of the smart survivor. How can we rely on ‘suspect’ fundamentals?

The commission-based style of remuneration throughout the industry has destroyed the quality of research, advice and company behaviour as we have found out with AMP and the banks where profits are more important than the client.

The bias towards the never-ending buy recommendations is over thanks to the emergence of the new short-sellers searching for the truth. Stocks can go down, and they can go down a lot. Blue Sky is a perfect example of all that is wrong with the industry.

The absolute respect of price movement and its analysis when used in conjunction with strict risk controls can enable us to bias our stock portfolio heavily towards the consistent generation of positive returns. Let me put to you another of the premises that I base my portfolio strategy on because it’s the simple, common sense premises that work.

When trading and investing in stocks there are four possible outcomes.

  1. Big wins
  2. Small wins
  3. Small loss
  4. Big losses

This underpins many other aspects of control I use in running an effective portfolio. By simply cutting out the possibility of big losses, number 4 on the list, with proper risk control we can bias our trading returns heavily towards consistent profitability. Small losses and wins effectively cancel themselves out and you are then left with the big wins, which is the the basis of your profit and returns.

That’s the difference between a winning portfolio and a losing one or one that constantly carries the heavy weight of drawdowns. Not only do stocks go down but also up, and powerfully. We needn’t worry about stocks that are going down or struggling like the banks TLS and AMP but rather focus on the great opportunities that exist. Current examples of powerfully trending stocks include CSL COH TWE A2M REA NXT SBM FLT BPT and NEC. When their trends change I will exit them regardless of any other ‘information’ inputs. In fact A2M was a casualty recently after a meteoric run. The stock may well bounce back but for now sentiment has taken a swing for the worse and rather than watch it go down we prefer to take lock in our profit (387%) and let this period pass and jump back on when a new signal is generated. It is a simple and very effective premise, pocket the cash and move on, no matter what happens next. Trading and investing is about generating consistent profits not about being right.

To further understand how I can help you develop such a ‘rock-solid’ trading strategy and help you sleep at night take a free two-week trial of our service at where I introduce you to our model portfolio concept that offers access to this ‘rock-solid’ process.