Building a High-Yield Portfolio is a Process

Building and managing a high-yield portfolio is a process. This is a construction project that does not end. This is not something you quickly put together and file under investments. A high-yield portfolio is constantly changing. Creating and managing your own portfolio should not require more than four hours per month. As you gain experience, you will spend less time than that.

Guiding Principles

These guiding principles will help you build and manage your portfolio.

Principle 1. Dollar-Cost-Averaging (DCA)

The first principle involves dollar-cost-averaging. The stock market is constantly moving up and down. Investing a large sum on one day is risky because the next day, week, month, or year the market might drop significantly. Years might have to pass before the investment appreciates to its original value. Never invest a lump sum at one time! Invest a small sum of money on a regular time interval. This is referred to as Dollar-Cost-Averaging (DCA), which helps you obtain a lower average cost on your investments. Consider making a $30 to $100 monthly investment commitment to offset the risks associated with the roller coaster stock market. Over the long-term (5 to 30 years), this principle will increase portfolio performance.

Principle 2. Reinvest all unearned income

The second principle involves reinvesting all unearned income (interest, dividends and capital gains). Your money will compound much faster if all unearned income is used to buy more stock.

Principle 3. Invest in companies with strong historical sales/share and earnings growth (well-managed companies)

The third principle involves buying growth stocks—companies whose sales/share and Earnings Per Share (EPS) are increasing at a rate faster than the industry in general (>20 percent annually for the past 3-5 years). They should have good prospects for continued sales/share and EPS growth three to five years from now.

Principle 4. Diversify with respect to market cap and industry

The fourth principle involves diversifying within industries and market capitalization. Diversification helps spread risk. Do not build a portfolio with companies of the same capitalization class and industry. A truly diversified portfolio will contain stocks from varying industries and market caps.

Principles 1,2, and 4 are pretty straightforward self-discipline issues. However, locating companies that have performed well over the past 3-5 years is not easy (principle 3). We will teach you how to find stocks with excellent growth records and we will post approximately 20 growth stocks with varying market capitalization for you to choose from on our website, www.ayionline.com. Locating the twenty growth stocks required screening approximately 4,000 publicly traded companies. The companies will be updated and changed as time progresses and things change. This is a time consuming process, but we believe it will greatly enhance the likelihood that a beginner investor will actually start investing. Please use the companies we have screened as training wheels.

If you adhere to these principles, your portfolio should beat the S&P 500 Index year in and year out.

All right, let’s go find the next Wal-Mart. Mundane retailers can make you a fortune.