You have probably heard of wealthy people having a portfolio, but what is a portfolio and how to manage one? There are professional portfolio managers, that is a real job, but in this article series I will teach you how to create and manage your own portfolio, as if you were a professional.

So what is a Portfolio?

In finance, a portfolio is a collection of investments held by an investment company, hedge fund, financial institution or individual. (Wikipedia)

• It can be a formal portfolio, registered at a brokerage firm or investment company or investment bank, typically managed by a portfolio manager, or self managed, but it's considered as 1 overall investment and taxed/insured as such.
• It can be an informal portfolio, just whatever assets you own, and use it for investment purposes: estate, farmland, cryptocurrency. This may not be formally registered as your universal portfolio, and may not benefit from insurance protection, but it offers better flexibility.

The portfolio type you will choose will depend on your investment style, risk tolerance and the amount of wealth you have. It doesn't matter, the investment rules are the same, and to be successful, you will have to follow the same steps in either case.

Also, note that a portfolio itself is not just a collection of your assets, it's also a technique of minimizing your total risk exposure of your capital, as we will see later on, there is more to portfolio management, than just to keep a list of your assets.

Why to keep a Portfolio?

Every wealthy person has one, middle class people should have one too (because in most cases they don't), and poor people should get their hands on some capital first.

A portfolio is a technique to minimize the total risk of your capital, it is beneficial to the diversification of your investments, to allocate your total capital into different investment sectors, and to minimize the overall risk your wealth is exposed to. It is both an attack strategy (to get more money) and a defense strategy (to protect your existing money). So in my opinion everyone should run one. I do.

How to Setup a Portfolio?

First of all you will need a spreadsheet manager software, you have to keep statistics of your investments, and there is just no way you will do it without a spreadsheet manager. You will need to calculate some math equations and plot some charts, and this way it will be easy (don't worry I will walk you through).

• You could try Microsoft Excel for Windows:
  http://office.microsoft.com/en-us/excel
• Or LibreOffice (recommended) for Linux, which is also FREE:
  https://www.libreoffice.org

Then you will need to import all statements into the spreadsheet, calculate your profits, your losses, your growth rates, APR, your drawdown, your risk, etc...

Note that in your portfolio spreadsheet you should only work with gross values, your accounting and taxes should be separate and calculated separately another time. In the portfolio spreadsheet we are only interested in the gross values, because that is the basis of the investment.

If you made 100% profit and the government takes 50% away, that is sad, but that is another issue, your (gross) profit was still 100%, and statistically this is what counts, as the portfolio growth is based on this.

In certain jurisdictions if you don't take out your investment you are not taxed yet, so in either case, we will work with gross values.

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Stay tuned, in the next part I will walk you through step by step, how to setup the spreadsheet file, and do some math calculations. It will be easy I promise!

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