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How to Find the Right Stocks for Yourself

Finding stocks to own can start with businesses that you are more familiar with.

But, finding businesses that fit into your portfolio represents a different kind of challenge.

To find the right businesses to own, you might want to start with your own financial goals. After all, every person has different needs and goals in different stages of their life. Some may be investing to outrun inflation while others may be investing to build a comfortable nest egg in the future.

So, different investors will have portfolios that look different. How might one go about building a portfolio that’s right for himself?

The Kuo knows

The following are by no means prescriptions – they are merely suggestions. Earlier this year, my colleague David Kuo had gave a presentation on how an investor’s portfolio might look like. He suggested that a portfolio can be made up of three major portions: a solid income base, a growth layer, and a speculative tip.

The proportion and balance here are critical.

For instance, if we are looking for income to supplement our living expenses, then keeping a larger proportion of dividend stocks could be right for us. However, for the younger investor who is looking to grow his nest egg, he or she may be willing to hold a larger proportion of growth shares.

Ultimately, finding the right stocks should align to your financial needs and goals.

A Fool’s take

Over the long term, the stock market is one way we can grow our wealth.

For perspective, the SPDR STI ETF (SGX: ES3) – a proxy for Singapore’s market barometer, the Straits Times Index (SGX: ^STI) – has delivered a total annual return of 7.9% from its inception on 11 April 2002 to the end of July this year. That rate of return can double our money every nine years.

With more than 700 stocks on offer on the Singapore stock exchange, how we use the stocks at our disposal could prove to be important if our goals are to be met. So, keep in mind the proportions you are aiming for, and how it can help you achieve your own goals.

Learn more about investing through a FREE subscription to Take Stock Singapore. Sign up here for The Motley Fool's weekly investing newsletter that will teach you how you can GROW your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn't own shares in any company mentioned.