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How To Manage Your Portfolio To Maximize Your Returns
Nov. 17, 2023 9:48 AM ETBDT:CA, BIRDF, DAKT, IGIC, NATR, PRDO7 Comments
Yuval Taylor profile picture
Yuval Taylor
Investing Group Leader
Summary

    Portfolio management techniques are vital to achieve successful returns as a retail investor.
    I suggest starting with a simple method: create a ranking system for stocks, buy the top few, and sell lower-ranked stocks only if you need cash to buy more.

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This article was written by
Yuval Taylor profile picture
Yuval Taylor
2.9K Followers

Yuval Taylor is an author and analyst with 8 years of experience using multifactor ranking systems to buy and sell stocks. He focuses on microcaps and emphasizes evaluating every stock from as many angles as possible via algorithm. He is the leader of the investing group The Stock Evaluator.

Features of the service include: disclosure of Yuval’s personal positions, 2 unique portfolios, a spreadsheet of nearly 10,000 stocks rated from 0 to 100 weekly, and live chat for questions. Learn more.
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Analyst’s Disclosure: I/we have a beneficial long position in the shares of NATR, IH, BIRDF, BDT:CA, PRDO, DAKT either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Comments (7)

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Comments (7)
chandlerdanforth profile picture
chandlerdanforth
24 Nov. 2023
Comments (102)
Why are you considering "transaction costs"? Most brokers allow you to trade commission free ... My favorite broker is TD Ameritrade. I use their Think or Swim Platform ... the BEST in the market, IMO.
Yuval Taylor profile picture
Yuval Taylor
30 Nov. 2023
Comments (487)
@chandlerdanforth Transaction costs are composed of commissions, market impact costs, and bid-ask spread costs. Even if you pay no commissions, you'll still pay the other two costs unless you're trading extremely liquid stocks.
TobyWanKenobi profile picture
TobyWanKenobi
18 Nov. 2023
Comments (251)
Excellent evaluation and great help. Thanks
a
anonysubscribe
17 Nov. 2023
Comments (616)
amazingly detailed recommendations simply explained for this newbie
j
jsulli112
17 Nov. 2023
Comments (25)
Thank you, Yuval. A lot of great stuff in here
hawkeyec profile picture
hawkeyec
17 Nov. 2023
Comments (4.92K)
I follow you because you are an intelligent gentleman who earnestly seeks to find ways to improve investor performance. However, if you would allow, and with all due respect, I would make a couple of comments here. First, and foremost, maximized or even, improved, performance is not an absolute. An eight percent return, for example can arise in an almost infinite number of ways. It can come entirely from taxable cash distributions, increases in the market price of an investment, or combinations of the two. You hedge with puts and earnings from your hedges are part of your return. But, at least in my world, all of that can only be properly counted after taxes and fees. Now, the taxes to consider are not just taxes paid on the returns, but they must be reckoned on the effects to total income after tax.

For example, income real estate, oil and gas properties, limited partnerships and other similar vehicles involve tax savings that reduce your tax bill without producing actual dollar income distributions. The returns come from what one doesn't pay. [As an aside, you can also be charged for taxes for which you received no actual money -- the notorious EOY mutual fund gain surprise]. For example, an enterprising strip miner in WV earned not only revenues and profits from selling his coal, but benefited from reduced taxes on his other income as a result of an allowed depletion allowance deduction as the coal reserve was sold off. When his mine was, in fact, depleted that allowance was lost and the property was about to cost the miner some money to clean up and return the land to its original state. It was then that our miner had a brilliant idea, instead of just cleaning up and walking away, he decided to consider his ugly hole as a wasting asset and call it a landfill. He would gain revenue from selling his depleted mine to waste managers who would pay to deposit their trash in the miner's hole. Not only would he profit from this revenue stream, but as the leftover hole filled up, the space left to sell was shrinking. That made the hole into a depleting asset once again, allowing the deduction of a suitable allowance, reducing the ex-miners taxes once again.

The point here is that you are telling us the many ways to improve the gross returns from stock portfolio. However, some of those gross returns -- price increases, for example, aren't actually earned unless the stocks are sold. You may not know this, but if you invest 100k this year it will not matter what you earn in any year for the next 20. You may go up and down any amount but your average return will be determined solely by the value of your holdings at the end (assuming your portfolio contains all your after-tax dividends, reinvested). Only the beginning and ending numbers matter. I know you know the math for this, but most folks don't know the ongoing returns don't affect the average. This means that YoY returns aren't a factor. Unrealized gains, aren't actually returns at all until realized. Also, performance should only be calculated on a risk-adjusted basis in relation to one's personal needs and goals. I am 79, with an uncertain life expectancy. For me long term goals for returns have only involved dollar income, net of tax, for some time. That income has risen every year since I retired in 2006, while my tax bill has remained very steady at 8-9% of total income. Also, as many professionals can tell us, the smallest of the major markets is the one for stocks. The commodity/futures markets, bond markets, property markets, and the scary Darth Vader of investing, the derivatives markets, are larger. The notional value of derivatives traded in a typical year equals 9 times the total global GDP, about $900 Tn. While stocks are easy to study, they are a walk in the park compared to building an optimal investment portfolio, built to achieve one's comprehensive goals. My portfolio is comprised of about 35% stocks, a good deal of which are BDCs, REITs, and equity funds (none of which are ETFs or index funds). Twelve percent of my money is in T-bills, cash, and other equivalents, and the rest is in T-bonds, muni bonds, corporates, preferred stocks, CEFs, Vanguard fixed income funds, and a bit of other secret sauce. Moreover, not approach can remain stable as one ages and the world changes.

I respect what you do. You have paying customers who also follow you because they can learn from your work. However, stopping at stock-only strategies doesn't really cover the problem much. I don't aim at common stock market benchmarks. Rather, I look at my position on the efficient frontier, where my risk-return profile has operated dead on the EF line for the nearly 20 years I have been checking it. Moreover, every new year I have achieved a new dollar income record. The biggest change in my life, besides aging, is the effect of my late-wife's passing. Among other things, my tax bracket has leaped up two levels so I had to change the nature of my tax-advantaged investments and my deductions.
r
rec2
17 Nov. 2023
Comments (224)
@hawkeyec thank you for sharing - very interesting.
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IGIC	-	-
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NATR	-	-
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