5 Principles to Creating and Managing an Investment Portfolio

Retirement funding depends on the proper creation and management of your investment portfolio. And, the nearer your retirement, the more critical your choices are. Of course, market turns, new investment products, and the political scene can complicate managing individual portfolios. But, the basic principles guiding quality investments are simple!  

This article will give you the top five principles that lead to a well-rounded, table, and high-performing portfolio. Of course, I always recommend working with a certified financial planner, but these principles will help you make informed decisions with your financial planner.

Create a Clear Goal

According to the Social Security Administration, the average American lives about 18-20 years after retirement. Still, experts recommend having about 30 years’ worth of money saved to retire comfortably. But what is 30 years’ worth of cash?

There are a few widely-accepted methods to calculate the required nest egg (the money sitting in investments). We’ll cover one example here.

Experts agree that a comfortable retirement requires 80% of your income at retirement. So, for example, if you make $100,000 upon retirement, you’d need about $80,000 a year to maintain a similar lifestyle.

You can determine your total nest egg by dividing your post-retirement annual income by 4%. So in the case of retiring on a $100,000 salary, you’d divide $80,000 by 0.04, totaling 2 million as your needed investment base.

This method is helpful to create target nest egg goals, but it isn’t foolproof. The formula assumes at least 5% returns after taxes and accounting for inflation. It also assumes the investor lives about 30 years after retirement. This method would need review for other return rates, significant rises in inflation, and longer life. Professional financial advice is a great asset to check for these factors.

Determine Investment Strategy


All successful plans start with a plan, so the first thing you’ll want to clarify is your investment strategy. Your strategy will depend on your risk tolerance, need for liquidity, and the amount of time you have to reach your goal. Popular methods include strategic investing, core-and-satellite investing, and tactical investing.

Strategic investing is a conservative approach built on long-term investments at a steady, reliable return rate. 

Tactical investing is more aggressive, taking higher risks for a chance to make more wealth quickly.

Core-and-satellite investing is a hybrid of the previous two. The investor will typically use most of their funds in strategic investments while tactically investing the remainder. This combination lets the investor have peace of mind that the bulk of their funds is growing predictably (if unexciting) while still taking part in higher returns.

Establish Performance Criteria

Most investors worry about knowing when they should hold or sell low-performing securities. One way to confidently navigate those concerns is to create performance criteria for the entire portfolio or per security. By having established floors and ceilings in your portfolio, you can make tough choices much easier. 

Your criteria will depend again on risk tolerance, liquidity needs, and time left in the workforce. There are several resources to help you make educated decisions yourself. Partnering with a professional financial advisor will save you time and increase your confidence in decisions.

Don’t Put Your Nest Egg in One Basket

Anyone who relies solely on one investment product will likely suffer more significant losses during market changes. For example, during the COVID-19 pandemic, the stock market has fluctuated dramatically. On the other hand, the real estate market has grown at much higher rates than are typical. Yet during the 2008 housing market crash, real estate values plummeted. 

All investors need to diversify their portfolios appropriately. By using a combination of investment products (often with variety within each category), wealth-builders can weather the storms of economic crises while enjoying the profitability of growing markets.

Investments are About Time

This last point is crucial to understand when deciding whether to sell or hold on to investments. The market cycles up and down unpredictably each day, but the long-term cycles are much more predictable. 

Generally, investors should expect not to sell during a crisis or bear market. If anything, bear markets are a great time to prepare to ride the next bull market. I again recommend working with a certified financial planner to help you determine when you’ll profit from buying and selling products in a downturned market.

Need Help Building and Managing Your Wealth?


Few people have the time to give their retirement accounts the focus it requires– especially those who need to make up ground close to retirement. Working with a certified financial planner allows you to get higher profits, have more confidence making decisions, and take far less time than managing your portfolio on your own. 

Rex Berhashi is a certified financial planner and owner of BLU Financial Planning. Located in Orange County, Rex is ready to partner his successful financial planning career to your dream. Contact Rex today for a consultation– and to see your portfolio grow!

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