Last month, millions of people made New Year’s resolutions. Many of them have likely already come to a halt. But the experiment I started on Jan. 1 is still going strong, and as the new Voyager Portfolio enters its second month, you’re going to see this series of articles on promising stocks make a shift.
Why make an abrupt change after a month of looking at 10 interesting, underfollowed stocks? Because as valuable as it is to scour the investing universe for the most promising companies, there’s another aspect of portfolio management that many investors fail to emphasize nearly enough. Because at the end of the day, it’s at least as important which stocks you choose not to go into your stock portfolio as it is which ones make the cut. And for those who already have an extensive foundation of investments through mutual funds and exchange-traded funds, unnecessarily duplicating exposure often just doesn’t make much sense.
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In the introductory article to this series on New Year’s Day, I set out the parameters for what the intention was behind the Voyager Portfolio. The basic tenets were pretty simple:
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Focus on stocks that have not already recommended by Motley Fool services.
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Look for a mix of different types of stocks, rather than concentrating solely on growth stocks, value stocks, or some other specific category.
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Avoid stocks that I’ve already invested in elsewhere.
There’s nothing particularly special about those guidelines. Motley Fool recommendations on average have beaten the market, so my decision to go beyond that vast universe of covered stocks wasn’t based on performance. Rather, given that recommended stocks tend to get plenty of analysis elsewhere, it didn’t make sense to make them a focal point for this portfolio.
Diversification is an important element of any investing strategy, but there’s no magic formula for deciding whether a portfolio is diversified. And in the context of the Voyager Portfolio, the fact that it’s designed for someone who already has broad-based exposure to the stock market through ETFs or mutual funds takes some of the pressure off having to cover every single sector or industry within the market here. The Voyager Portfolio has 10 stocks that are spread out fairly broadly across the market, and while that wouldn’t be enough by itself to represent a diversified set of holdings, it’s a reasonable start that fits well in the bigger picture of all my holdings.
