To build true wealth in the stock market, the ability to pick winning stocks alone isn't sufficient. A lack of proper diversification across a number of investments can expose a stock account to unnecessary risk.
Moreover, deciding how long to hold on to winners before taking a profit -- and when to trim losers -- can be an extremely daunting exercise, given the consequences if you're wrong.
If you're seeking a more structured approach for achieving long-term stock investment success, consider subscribing to Million Dollar Portfolio (MDP). Million Dollar Portfolio is a managed, real-money model portfolio that draws its holdings from across The Motley Fool's highly regarded newsletter services. Subscribers to the service receive full access to:
- The complete list of MDP Portfolio holdings, including percentage allocations for each recommended investment.
- "MDP Watchlist" -- the specific stocks trending on MDP analysts' radar screens, drawn from The Motley Fool's stock-idea newsletters.
- The MDP "Match" tool -- An online calculator that returns the number of shares of each stock in MDP's portfolio you should buy given a specified dollar amount.
- A newly optimized comprehensive stock-tracking platform: The Motley Fool Scorecard.
- Periodic premium special reports that cover stock investment ideas, portfolio management, investment psychology, and more.
Allocation strategy and investment philosophy
Traditional portfolio allocation methods tend to focus on a specific investment style (growth, value, income, etc.) and/or categories such as geography, market capitalization, or industry.
The MDP team employs an innovative "strategy-focused" method to guide purchases. MDP analysts cull stock ideas from The Motley Fool's five feeder services: Stock Advisor, Rule Breakers, Hidden Gems, Income Investor, and Inside Value. Specific investment ideas are evaluated for their risk/reward potential, as well as their fit with the MDP team's investment philosophy.
In a nutshell, this philosophy is "to identify, buy, and tenaciously hold good companies." Companies earmarked for investment in MDP will hold at least three of the following traits:
- A clearly defined and compelling mission -- not simply the presence of a substantial profit.
- Significant competitive advantages.
- Superior growth in revenue, cash flow, or dividends.
- Capable, incentivized leaders with capital allocation chops.
- Large and growing market opportunities.
- Financial fortitude (i.e. a healthy balance sheet, sustainable cash flows, etc.).
The Million Dollar Portfolio team believes in letting winners run, and adding to those positions over time, while holding or trimming losing positions. Under this methodology, the best stock picks will have the most influence over the portfolio over the long haul, and losing investments will represent a diminished portion of overall MDP market value.
The criteria for avoiding a mistake which trips up most investors -- that is, selling an appreciating stock too soon -- is relatively simple. As long as an investment continues to meet several of the "good company traits" listed above, it will remain in the portfolio. Conversely, similar rules apply when deciding if it's time to part ways with a designated stock ticker. These are:
The company no longer meets MDP standards -- failing to satisfy at least three of our good-company traits.
The original investment thesis is broken.
The investment is outside MDP team members' circle of competence.
The opportunity cost of holding, versus cashing out and investing in other potential winners, is too great.
The Million Dollar Portfolio Team
Million Dollar Portfolio is led by Matthew Argersinger (TMFMattyA). Matthew holds a degree in economics and finance from Brandeis University, and worked at the U.S. Bureau of Economic Analysis prior to joining The Motley Fool.
A graduate of The Motley Fool's first Analyst Development Program (ADP), Matthew joined the Stock Advisor team in 2008, where he worked for two years. Subsequently, he's worked on the Fool's Alpha, Big Short, and Rule Breakers services. Matthew is also the portfolio lead for the Supernova: Odyssey 1 mission.
Matthew is joined by analysts Paul Chi (TMFBabo), and Jason Moser (TMFJMo), both early graduates of The Motley Fool's Analyst Development Program (ADP). Paul has the distinction of holding the highest score among thousands of investors who compete daily in Motley Fool CAPS investment simulation game. Jason has worked on multiple Motley Fool services, and educates and entertains investors each week on the Market Foolery podcast.
More Than Just Investment Advice
When you join Million Dollar Portfolio, you'll be welcomed into The Motley Fool community. You'll get to interact with other subscribers, as well as with MDP team members themselves. The MDP discussion boards provide a forum to ask questions and provide your own insights on specific stocks and long-term investing, in general.
Each active stock in MDP has its own discussion board where investors and the MDP team weigh in regularly. You'll also find boards for topics ranging from "Stocks That Interest You" to "Alternative Investment Strategies."
In fact, investor education is a top priority in the Million Dollar Portfolio service. MDP seeks to not only introduce investors to the rich universe of stock ideas in the Motley Fool subscription services, but to teach fundamentals of successful portfolio management along the way.
Finally, as mentioned above, subscribers get access to the newly updated Motley Fool Scorecard, a real-time, mobile-ready stock tracking platform that offers personalized views, multiple portfolios, and an abundance of metrics you can use to track your performance.
Ready to take action?
MDP subscribers understand that it takes a cohesive, disciplined strategy to grow a portfolio over time, not to mention the need to have a full arsenal of actionable stock ideas at their disposal. If you're ready to gain access to a full slate of current MDP stock holdings and suggested allocations, as well as the powerful investing and educational tools we've discussed, all backed by a 30-day, 100% membership-fee-back guarantee, simply click here.
The Motley Fool has a disclosure policy.