How I Constructed My Portfolio Using Value Averaging

Ever wondered how to build a solid stock portfolio?

Confused enough by the so called experts on TV?

Lost money following expert advice?

You are not alone.  Most experts that you listen to, give you –

  1. Free advice
  2. Advice is either for trading or short term investments
  3. There is no follow thru
  4. You have no one to go ask questions later on

Where do you go to if you want to build a solid long term portfolio?

From everything I have read about Value Averaging (more on value investing), it looks like this is a great way to build a long term portfolio. Everything I have read, points back to Dr. Edleson’s book, “Value Averaging, The Safe and Easy Strategy for Higher Investment Returns”, published by Wiley in 1993 and then again in 2007.

Here are some of the reasons for constructing a portfolio using value averaging.

  • Value averaging forces me to start with end goal in mind.
  • Value averaging will force me to actively monitor my portfolio. This will ensure that I reach my target in six years
  • At any given time, value averaging will tell me know how much ahead or behind I am from my goal

I got so interested that I am now constructing a portfolio using value averaging. My plan is to augment value averaging with value investing and construct a portfolio with a target value of Rs. 12,00,000 over six years. I started with Rs. 100,000.

What more, I will share all aspects of my portfolio with my readers. Here’s my invitation to share the real-world experience and learn about build a stock portfolio first hand.

 

I will share with you all the practical situations I face and how I overcome them over the next six years.  I plan to share weekly updates to my readers. I hope to share at least 50 weekly thoughts as we make progress. It will include –

  • The rules that I use to construct the portfolio
  • The holdings of the portfolio
  • All transactions (except some like dividends etc.)
  • The rationale behind the decisions
  • The thought process, including the alternatives considered in making decisions
  • The growth and the actual values of the portfolio
  • And more as I get into it

This is an invitation to come learn with me how one can create a practical portfolio using value averaging.

My portfolio will be based on the following ground rules

  • The portfolio will consist of equity and cash
  • The portfolio will follow value averaging as a general rule
  • Value path will not be a line, but rather a range. It will be 10% higher and 10% lower than the calculated value line
  • New investments will be made only if there are opportunities to buy equity at a reasonable value
  • Equity will be sold only if they become over valued
  • I will not consider the impact of dividend on the overall returns
Value Investing Portfolio - Value Path

Value Investing Portfolio – Value Path

The portfolio –

  • The goal at the end of six years is Rs.12,00,000
  • Initial investment is Rs. 100,000
  • I will rebalance the portfolio every 2 weeks
  • My expected annualized rate of return is 12%
  • After one month, the value of the portfolio is 104,784
  • The portfolio currently consists of HDFC, HDFC Bank and TCS
vip-xls

Value Investing Portfolio – Value Path & Actual Value

Every week, I will share the following –

  • Expected value of the portfolio, +10% and -10% range
  • Actual value of the portfolio
  • Any action taken
  • Reason to take that action
  • Alternatives considered
  • Portfolio holding
  • My thoughts on how the portfolio is doing, investment strategies etc.

Following my portfolio will help you in the following ways –

  • You will learn from my experiment without risking your hard earned money
  • You will be able to build your own portfolio
  • You will see how value investing works in the real world
  • You will learn how to overcome obstacles and yet build a solid portfolio
  • You will be able to share your ideas and thoughts with other investors
  • You will benefit from the ideas and thoughts of your fellow investors
  • You will be able to ask question to your fellow investors
  • You will be part of a one-of-a-kind social experiment in stock investing

Participate in a real world practical experiment in stock investing and portfolio building using value averaging.

Here’s your personal invitation to come share the learning with me.

All this for just Rs. 65 or USD 1.25 per week (less than a cup of coffee at Starbucks or Café Coffee Day).

Here are a few updates

Join now and start learning!

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