As humans we are governed by our emotions when we make decisions. We believe and claim many times that we are very rational, but the emotions are with us whether we like it or not. A clear example is that we often sell the stocks that are doing best, to take home the profit, while we keep the ones that are doing the worst because it is so difficult to actually realize the loss. Therefore we, or at least I, need a clear goal and clear rules.
– Purpose goal
Brief description of the portfolio as a whole and what your goals are. Goals can be just returns in %, but it can also be goals in the form of learning more about a certain industry or perhaps a continent.
Content and distribution
– Asset type and possible distribution
For example, in a portfolio of funds, it could be written like this: Y% Swedish funds, Z% Global funds, etc. Another example could be a portfolio of shares described by the number of shares and e.g. distribution by industry.
What criteria must be met for me to buy?
What criteria must be met for me to sell?
If you have several portfolios/strategies, also write down how your capital should be distributed between them. My tip here is to also have separate accounts for each strategy to more easily keep track and follow up on the total. Also remember that your structure and rules may change as you learn more. But always ask yourself if it is your feelings that influence the change you want to make or if it is new knowledge.