Pyramid portfolio wealth building makes money work for you to build financial security and retirement independence. Declare your financial independence using this wealth building strategy by putting in the time and effort needed to become a superior investor.
Portfolio Building That Works Money course, Lesson 7, outlines the pyramid portfolio strategy to build wealth. Links at the end guide you to related content if you want to learn more.
What’s in this lesson for me?
The lesson lays out the pyramid portfolio strategy so you can set about preparing your path to wealth. The three pyramid portfolio building phases and the function of each portfolio level gets explained as well as how each contributes to wealth building.
Building wealth takes time and effort
But like anything else, results show both the time and effort you put into it. You can learn how to become a superior investor by spending the time and making the effort. Investing is simple, but it is not easy to consistently do well.
The White Top View bite-sized lessons and discussions will continue and cover the many aspects of investing and growing your portfolio. By taking the time and making the effort we can help you reach your financial security goals.
Pyramid portfolio wealth building works for all investors
Investors prosper with wealth building pyramid portfolios. Pyramid portfolio strategy is one of the best things a new investor can learn. Investors can build financial security and retirement independence using the pyramid inspired portfolio approach. Any investor from the newest beginner to the most knowledgeable, advanced and experienced, can learn and use the pyramid portfolio strategy.
No job or employment can possibly pay you as well, over a lifetime, as investing can. You will gain more from the hours used to learn and manage your own investments than from any other activity in your lifetime.
Investors prosper using pyramid portfolio wealth building strategies
The first stages of pyramid portfolio building can help beginners learn investing basics. You can develop your portfolio as you grow in knowledge, understanding and investing skill. This can let new investors set up the base of their future wealth, while they develop the knowledge and experience needed to build financial security.
All investors can use the pyramid portfolio strategy for a lifetime of wealth building and superior investment performance. Long time investors, using this approach, improve their performance primarily because they develop greater market awareness. Greater market awareness can help any investor be more successful.
We Must Be Aware:
“Investing is simple, but not easy.”
Warren Buffett
This Warren Buffett quote reminds us that there are many things to know and do to become an investor that does simple investing well. Keeping the first or base layer simple, gives us the opportunity to take a step by step approach to learning the portfolio building process. You can learn more about the pyramid portfolio strategy in the many bite-sized White Top View posts that follow.
Pyramid Portfolio build on 3 layers
1. Base layer investing
2. Mid-layer trading growth
3. Top layer speculations
The three pyramid portfolios layers are distinct and different. Each has a specific role. The pyramid portfolio approach is entirely based on first building a solid income portfolio as the foundation. Above the income base, depending on your circumstances and market conditions, other layers can offer greater performance possibilities.
However, each new layer always makes up proportionally less of the total portfolio. The income portfolio is always the largest; the speculative portfolio is always the smallest.
The income portfolio always forms the base of all other investing activity. You must never try to build either a growth portfolio or speculative portfolio without first having a solid established income portfolio as the base.
Begin your pyramid portfolio wealth building with a solid income foundation
Investments in well established dividend paying companies are held in the income portfolio to serve as the base or foundation of your investing pyramid. This critical solid base works for any investor wanting to build wealth and security. No shortcuts allowed here. Always build long-term portfolios on an income base.
Choices: income, + performance or more!
Investors using the pyramid portfolio building strategy, can choose to build only the base income layer. That can give them a solid, conservative and reliable financial asset. Providing that they begin in time, the income base layer has the great advantage of needing limited attention. Once investment selections are make, it almost manages itself. But not completely. Paying attention always pays off when investing.
The income investment portfolio, holding shares in large, established, dividend paying companies, dependably grows with the economy. All the while, shareholders are paid to ride. The dependable dividend payments will flow year after year. That offers security, comfort and retirement independence. Note: achieving financial security and retirement independence with this approach, takes many years.
When it comes to retirement independence, start soon enough and you will not have to play catch up. The more years you have to grow your financial base, the greater are your financial possibilities. When time is on your side, more conservative choices can dependably deliver excellent long-term results.
The Essence of Pyramid portfolio wealth building
Pyramid portfolio base income investing
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- invest in large profitable companies
- conservative economic risk
- some growth
- dividend income
- least attention needed
- few decisions
- few trades
- long (3+ years) holding periods
- least knowledge
- modest returns
- 50% to 100% of total portfolio
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The income investment portfolio forms the large broad base of all pyramid portfolios. It is the solid conservative foundation that can be used in all markets. Income portfolios take the least time, knowledge and attention to build and manage. All portfolio builds should begin with a solid income investment foundation.
Many investors are content to have their entire investment holdings in equities that qualify as income portfolio investments. That 100% invested, solid conservative approach has successfully performed very well for generations of investors. If you want to build only one type of portfolio and learn one aspect of investing, this is the one to learn and build.
Investors seeking more or faster portfolio growth have to move beyond the income layer. Using the Pyramid Portfolio approach, a minimum of 50% of a total portfolio remains in the solid income base layer.
Successful investors willing to learn and use an hour a week can build wealth by overseeing an income portfolio. No further action required.
For investors looking for more growth, higher returns or more involvement in managing their wealth building, there are many choices. Two key ones follow.
Growth Portfolio mid level
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- medium-sized growth companies or large turn arounds
- low to medium risk
- strong growth
- low or no dividend income
- moderate attention needed
- more decisions
- more trades
- short to medium holding periods, weeks to a year
- moderate knowledge
- higher solid but more volatile returns
- 0% to 50% of total portfolio
Growth portfolio investing differs significantly from income investing. Growth portfolios offer greater total returns at higher risk and do need significantly greater knowledge and time to manage well. Anyone willing to learn and dedicate an hour a day can build and manage a good solid growth portfolio.
Growth portfolios can be built after the income portfolio base reaches critical mass. Critical mass calculation and explanation will be in a following blog post. The growth portfolio will always be smaller than the income portfolio. It can grow to become between half to two-thirds the size of the income portfolio.
The growth portfolio is a fair weather investing vehicle. When conditions and opportunity are favorable, growth portfolios can dramatically accelerate your overall investment performance. However when circumstances change or are unfavorable, the growth portfolio investments get sold. Growth portfolios go to cash in unfavorable conditions.
Speculative Portfolio top level
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- small to medium-sized rapid growers or speculations
- high to extreme risk
- spectacular growth or price changes
- no dividend income
- close attention required
- many decisions
- many trades
- short holding periods, days to months
- high knowledge
- stunning winners, crushing losers
- 0% to 30% of total portfolio
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There is no such thing as a solid speculative portfolio. Speculation is for the courageous investor and only when conditions are fantastic. All the stars, circumstances and ducks must line up before building a consistently performing speculative portfolio. That means most of the time, in most markets, the speculative portfolio has few or no holdings.
If growth portfolios are fair weather investing, speculative portfolios are strictly perfect weather investing. However, there is gold in them there hills! For those willing to learn, speculation can produce outstanding results.
Successful speculating skill can be learned. Done well, it is not gambling or buying a lottery ticket. However, if you don’t know what you are doing, stick to buying lottery tickets. You will lose your money but at least you know the incredibly long odds are insanely unfavorable.
With speculating, when circumstances are excellent, the returns are exceptional and the risks manageable. But the knowledge, time and effort required to do it well is also substantial. The best speculators only play when the odds are favorable. That means most of the time, in most markets, the speculative portfolio has no positions.
When conditions are favorable, speculators pounce to make hay while the sun shines but quickly withdraw when the sunsets.
Each of these portfolios will be further discussed in following posts.
Investors Prosper With Pyramid portfolio wealth building
Wealth building pyramid portfolios can help you build financial security and retirement independence. But like anything else, results show both the time and effort you put into it. You can learn how to become a superior investor by spending the time and making the effort. Investing is simple, but it is not easy to consistently do well.
Our bite-sized lessons and discussions will continue and cover the many aspects of investing and growing your portfolio. By making the effort we can help you reach your goals.
Commit To Yourself
If your investment goals or resources mean you want or need greater investment performance, you must start by making some fundamental personal decisions. You must commit to yourself and hold yourself accountable, for taking the time and making the effort to learn and invest well. You can choose to do it, but it does take time and effort.
Do not go beyond the basic income portfolio if you are not committed to investing the time and effort needed to learn and manage the advanced layers of a pyramid portfolio.
Investors wishing to progress beyond the basic performance level in their portfolio can move to the more advanced approaches. It is important to move along and make progress but also important to learn at your own pace and when circumstances are right for you.
Warren Buffett said, “Risk comes from not knowing what you are doing.”
Any fool can invest. Doing it well requires knowing what you are doing. Knowing what you are doing, manages the risk, keeping it under control. Knowledge and experience combine to make investing well a possibility open to anyone. Put in the time and make the effort; you can do this once you decide you want to learn.
The growth portfolio or second layer of your investing pyramid requires a good working knowledge of basic investing. Be in no hurry to get there. There is much to learn and the market will be there when you are ready.
Each of the three layers of the pyramid portfolio, in turn, need higher levels of knowledge. They also need progressively more attention to manage and consistently play well. Move to a higher level only after you become knowledgeable and comfortable with your understanding of investing and stock markets at each previous level.
Caution! For Advanced Investors Only!
The third or top layer should only be considered by advanced, superior and sophisticated investors, with a track record. Their own track record! Looking over the shoulder of an excellent financial advisor while they produce good returns with your money is their track record, not yours.
Yes, it is your money and you keep the gains. Just be sure that you are not arm-chair quarterbacking or back seat driving thinking that you know what it is like to invest or trade. The point is, being on the firing line, with real money, making decisions and taking action yourself is a very different situation than watching someone else do it for you.
The speculative portfolio is the most demanding, volatile and challenging to manage well. Before trying to succeed with a speculative portfolio, be certain that you have already shown you can successfully invest, grow capital and trade profitably. You can do all that at the growth portfolio level. Master that before considering building a speculative portfolio.
As Warren Buffett told us earlier, “Investing is simple, but not easy.” I urge you to take the time to learn before you consider risking capital with any aggressive growth or speculative investing moves. Speculative investing is legitimate and pays spectacularly well but is no place for either a beginner or intermediate player. Learn before you try to earn or you will burn!
Why this lesson matters
By understanding the pyramid portfolio strategy you can start on your path to wealth. Build your portfolio in the three pyramid building phases and benefit from the function of each as it contributes to building your wealth.
Key take away points from lesson 7,
Pyramid portfolio wealth building:
Pyramid portfolio wealth building makes money work for you to build financial security and retirement independence. Declare your financial independence using this wealth building strategy by putting in the time and effort needed to become a superior investor.
- Invest time and effort to build wealth
- Pyramid portfolio building can be used by any investor
- Investing is simple but not necessarily easy
- Pyramid portfolios have 3 layers
- base income layer
- trading layer
- speculation layer
- Each layer has detailed stock selection specifications
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Use White Top Investor lessons to learn investing. By doing that you can grow into a knowledgeable, comfortable and confident investor. To learn how, you can learn investing one small step at a time at your own pace. Do that and become the master of your financial security and independence. White top Investor never sells or shares our email list. Learn more.
Wealth Building Portfolio Management lessons:
Introduction to portfolio management Lesson 1
Pyramid portfolio wealth building Lesson 2
How investors buy dips Lesson 3
Distracted investing misses profits Lesson 4
Investors never average down Lesson 5
Market patterns repeat repeat repeat Lesson 6
Research confirms investment counts matter Lesson 7
Portfolio measurements to size positions Lesson 8
Growth protects investing profits Lesson 9
Winston Churchill said crisis = opportunity Lesson 10
Weeding your investment portfolio Lesson 11
Next suggested course:
Money Choices That Grow Wealth
Have a prosperous investor day!
Bryan
White Top Investor
[email protected] WhiteTopInvestor.com
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