Building Your Dream Team
By: Reshveen, SixPackInvestor
As an avid football fan growing up I loved to play Fantasy Premier League. For those of you who don't know it is a football management simulation game. The game player will each be allotted a sum of money to invest in players to form a team. Your performance is tracked week by week as the league proceeds.
If one of your players scores a goal in real life for example the player will be awarded 4 points. If one of your players received a red card, 3 points would be deducted. The whole fun in the game is that you have to invest very wisely in your players. You simply cannot buy all the 'best players' as you have limited funds. You have to identify potentially good underrated players to be on your team. This requires a bit of research and definitely a bit of luck too.
Interestingly, that game taught me a lot about investing and building a portfolio of stocks as well. We all start off with limited fund sizes. Using that funds we have to make sure we do not overpay for any particular stocks as you want to at least be able to form a team!
If you start off with only $50mln you simply cannot go out and buy Ronaldo. Your budget would be way over shot. However as the season progresses and if he doesn't perform as well or if he got injured, his value could potentially fall! That is possibly when you might consider buying him.
The Secret to Winning
Interestingly the players who most often win the fantasy league very rarely invest in players who simply have a lot of 'hype' surrounding them. They acquire good players at undervalued prices and are always on the lookout for players who have yet to hit the 'limelight'. They also know when is best to transfer out players to acquire other players who might fit the team best.
This is exactly how you should construct your own portfolio as well. Never overpay for your stocks and always be on the lookout for potentially awesome companies which have yet to be paraded by analysts around the world. You have got to know when is best to sell your stocks if their fundamentals have changed.
How I build my Portfolio
Till today I build my portfolio just like I would my fantasy team. I have 11 core stocks in my portfolio with some substitutes. I do not intend to ever hold too many stocks in my portfolio as I want to be able to monitor the progress of each of my players efficiently.
And just like a football team, I cannot simply have every one of my players as strikers. I will need defenders and a goalkeeper too. In my investment portfolio just as in my fantasy team I also have a good mix of growth stocks (Strikers), asset plays (Goalkeeper) and dividend stocks (Defenders).
Start building your dream team today!!