Investing is Like Painting on a Canvas

Investing is a skill that can be learnt. And yet, it is not a skill that can be easily duplicated. Every investor has his or her own style that is hard for someone else to copy completely. This is why investing is both art and science. To me, investing is more like painting, and you are the artist.

When you start your investing journey, all of us start with a blank canvas. How you want to paint is up to you. Some prefer to invest only in a handful of companies, similar to keeping your canvas simple with only a few colours. Others might prefer to invest in many companies, buying a little of everything, akin to spreading your canvas full of colours.

This Is How I Do It

It took me a long time to find the right style for my investing. I started off with investing in small-cap companies that were deeply undervalued.

However, now I see my portfolio in a more holistic manner. Currently, I have invested mainly in high quality and stable businesses as my base. It is like painting the background of my canvas. First with the sky, then with the ground, to set a good and solid base to work on.

As a base, I have more than 50% of my portfolio invested in high quality and stable businesses which I do not have to monitor constantly.

Next, I have invested about 25% of my portfolio in companies that are faster growing but still have shown a certain level of success in the market. So these are companies that are already well-known but still show great potential ahead. I see it as painting some of the larger objects on my canvas, like a lighthouse or the forest.

Lastly, I will venture into much smaller and less known companies with huge growth potential. About 10% of my portfolio might go into these type of companies. Most of them are highly risky but have immense potential if they are successful. I see it as adding in the small and detailed items to enhance my painting, such as the birds and the rocks.

Keeping Some Cash

I always keep a certain amount of cash buffer in my portfolio. This is to ensure that I always have the ability to change or add more to my portfolio if the opportunities arise. In painting and in investing, the canvas is never really finished; there is always room to improve. That is why it might be good to save some unused paints on the side.

This is how I build my portfolio. You might build it differently but it does not matter. After all, there is never a right or wrong method of building a portfolio.

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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 Stanley Lim doesn’t own shares in any companies mentioned.