The process of building a strong, robust portfolio can be long and time-consuming. Investors need to understand their personal risk tolerance as well as their investment goals and objectives in order to build a productive and resilient portfolio. When I speak to investors, two types tend to emerge: those who lean more toward a growth-oriented portfolio, and those who prefer a yield or income approach.
I decided to explore how investors could construct two different portfolios using a total sum of S$50,000. These will take into account portfolio allocation as well as the availability of cash. Through these two examples, I hope to illustrate that it does not take a huge amount of effort or imagination to build a portfolio. With either strategy, investors need to be mindful of the risks and monitor the ongoing business developments that could affect each company.
Sample growth portfolio
A sample growth portfolio looks something like the above. Notice, though, that even though this is a “growth” portfolio, each company still pays out dividends, albeit at a lower overall yield compared to higher-yield companies. I have each company close to equal weight but also made sure I had cash on hand of around 5.5% of the portfolio’s value in order to take advantage of opportunities.
Growth, in this case, refers to companies that have identified good catalysts for long-term expansion, have made plans to broaden their geographical reach, and have engaged in mergers and acquisitions or are engaged in building assets overseas. The companies above fulfil these criteria and are therefore labelled as “growth” companies. The portfolio yield is also noticeably low at 2.7% of vested capital as the portfolio gears more towards capital appreciation over time.
Sample yield portfolio
For this sample yield portfolio, I selected companies with an overall higher dividend yield (more than 4%) and that are more geared toward income consistency and stability. Some of these names (e.g., DBS Group Holdings Ltd (SGX: D05) and Singapore Exchange Limited (SGX: S68)) also pay quarterly dividends, which is a very useful feature for a retiree.
Note here that the overall portfolio dividend yield is 4.7%, noticeably higher than for the growth portfolio. Although this may be labelled as a “yield” portfolio, there is still growth present in some of the above names, it just may not be as aggressive or as high as some of the names within the growth portfolio. Investors should assess each company on its own merits to decide if the projected growth rate is suitable for their risk appetite.
Investors can mix and match
The above are just two methods of constructing portfolios, based on either growth or yield characteristics. Investors can mix and match different names in order to create a portfolio customised to their own circumstances and goals. I generally look for a mix of fairly high-yield names to bolster my dividend income, while also seeking growth in other names. Investors can use these two sample portfolios as guides for how to structure their own personal portfolios to attain the investment goals they seek.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang owns shares in iFast Corporation Limited, Raffles Medical Group Limited, SATS Ltd, VICOM Limited, Frasers Logistics and Industrial Trust, Singapore Exchange Limited and Boustead Singapore Limited. The Motley Fool Singapore has recommended shares of iFast Corporation Limited, Raffles Medical Group Limited, SATS Ltd, VICOM Limited, Singapore Exchange Limited, DBS Group Holdings Ltd, and Boustead Singapore Limited.