How I Safely Build a Retirement Portfolio

This was in 2021, just after the COVID-19 pandemic aftermath.

Sitting across his small round table at the corner of his studio apartment was a man I know who’s worth at least a commercial property in Singapore. 

He’s a friend and reader of my blog. His “liquid” portfolio is $5 million. Of course, he tells me he can always put it in fixed deposits and treasury bills. But it wasn’t enough for him. He said:

Now, he is very aggressive. He tried to invest a million dollars and got burnt before. Since then, he didn’t trust his relationship manager. 

Previously, he got burnt with Singapore dollar junk bonds and volatile stocks. And he knew paying a $50,000 management fee wasn’t going to make his banker’s interests align with his.

He told me:

But you see, I wasn’t interested in his offer. I told him I don’t manage money for people. Sure, it’s very lucrative, but it doesn’t align with what I do. Otherwise, I would have stayed in private banking.

I believe most of us should take control of our own money. Because no one looks after our money better than ourselves.

So what I shared with him over lunch next should allow him to achieve his target returns. And I believe it will do the same for you.

First things first, calculate your entire savings and figure out how much you have to set aside for emergencies. I call this my “Emergency Stash”. 

I normally keep about a year’s worth of family expenses. This allows me to sleep comfortably at night. No matter what happens to the market, I’ll be ready if I ever need it – emergency medical bills, expenses for newborns, loans and so on. 

You need to decide what’s right for you. If you’re already in retirement, perhaps you need to set aside around five years of living expenses.

Then put however much you can possibly afford into the stock market.

Now let’s jump to the fun part – getting started.

We need to invest with a well-diversified portfolio. Let’s start with 15 stocks first. This is how you do it.

Buy Value stocks

The first five stocks I’m picking go into Value stocks. These are high-quality blue-chips that have predictable revenues, net profits, and many of them pay a low but growing dividends. Since you only need to buy four, make sure they are well-researched.

When I started building one of my portfolios, I bought companies like BlackRock, Visa, and the Hong Kong Exchange. To be honest, not all stocks will do well. Earlier this year, I cut losses for Diageo because the business wasn’t doing very well.

Buy Income stocks

Next, if you’re looking to collect income, then you want to buy your next four stocks in Income stocks. These are what I call Dividend Dominators. Actually, you can find them in my free resources here.

These companies pay steady, high-yield dividends that are well secured by their free cash flow year after year. Generally, I look for yields between 6% and 12%. 

I accumulated China Mobile (biggest China telco operator) at 8.7% yield and Venture Corp at 7% yield. Unfortunately, one stock I had to cut loss was International Houseware Retail (which owns Japan Homes).

Like one of my members said:

Buy Growth stocks

Moving on – pick four Growth stocks. Warren Buffett calls it “growth at a reasonable price”. These companies have far stronger revenue growth, are disrupting an industry and gaining a foothold in market share. Some are rising on a tailwind of an industry uptrend.

These are not overpriced growth stocks, and they may pay very little or no dividends at all. I picked up Interactive Brokers as my Growth stock. It has done very well.

Buy Special Situations

Once you’ve got around 12 stocks invested, you can start looking at Special Situations. I call them Special Situations because you’re expecting a catalyst or a macro event to happen in these stocks. 

These are tactical trades, and in my view, an intelligent speculation. Pick two stocks.

Total, this should give you 15 starter stocks across Value, Income, Growth and Special Situations.

Over time, continue adding money to your portfolio – add to existing positions and accumulate new stocks. Over the years, that’s how I’ve been building my Personal Portfolios this way.