TDO Investment Process STEP 6 – Portfolio Building

BuildingPort

This is the sixth in a series of articles elaborating on The Dividend Observer Investment Process.

The main point to build a dividend portfolio is to find the companies that will give you cash for the rest of your life while you are enjoying the walks of life. The idea is to construct a portfolio with a consideration that once you buy the stock, you will never think to sell. I personally prefer to own company’s stock having a product that “everybody needs and can’t live without it”.

So, How to construct a dividend portfolio?

No doubt, selecting a dividend stocks is indeed difficult and time consuming. This might be the reason why only few Filipino investors are investing in dividend stocks. Here in the dividend observer site, I will do my best to provide a comprehensive initial analysis of dividend paying companies. I carefully picked quantitative and qualitative metrics in such a way that when combined it will provide key insights into all the important areas of selecting a dividend stocks. These metrics has been discussed in the dividend observer investment process steps 2 to 4. The Dividend Observer Score (TDO Score) is the outcome of the weighed-up metrics. Looking on TDO score is enough to find out if I need to continue further research on a particular stock. A TDO score closer to 100% is commendable to continue further research.

In deciding to buy the stock, I follow the decision making step I learned from my mentor, “Ninjatrader919” – the owner of The Responsible trader website. He’s going through a 3-Stage process in buying decision making, here are the steps:

STEP 1. THINK (LEFT BRAIN MODE – clear, logical and analytical thinking)

Fundamental Analysis

  • Profitability – What is the earnings record of the company?
  • Products – What is the company’s main line of business and what is the product’s position in the market – market leader or just a follower?
  • Prospects – What are the company’s prospects in the future?
  • People – Who are running the company?

The TDO Score is my primary source of information whether a particular stocks indicates a favorable fundamentals.

Technical Analysis

  • What wave, what stage of the trend is it in?
  • Is the stock in the beginning, middle or end of the trend?
  • What chart patterns do I see?

Since I am investing for a long term, I am looking the chart on a monthly timeframe most of the time.

STEP 2. FEEL (RIGHT BRAIN MODE – creative, imaginative and intuitive thinking)

If I have the stock now, how would I feel? How about after a week? After 1 month?

TDO Investment process step 5 – Emotional Check discussed this further.

STEP 3. ACT.

  • If it passes both modes, point and click BUY.
  • If it fails any of the modes, repeat the process.

That’s it my dear readers. By the way, how do you build your portfolio?

In the next article, I will discuss the last step of the TDO investment process STEP 7 – Investment Performance Review.

Thank you for reading and all the best in your investing journey!

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