Portfolio Management

My portfolio management goal is an overall portfolio (annualised) internal rate of return (IRR) of at least 15%. This will equate to a doubling of the portfolio every four to five years on average.

I aim for an approximate 50/50 mix of large cap and small/medium cap companies. This ensures a mix of growth and income-producing stocks.

I keep the average dividend yield of shares in the portfolio above 4% to ensure a reasonable dividend cash flow. This ensures that the interest charges on my margin loan is covered and that the portfolio remains positively geared.

I hold a manageable number of shares in the portfolio so that reading and record keeping matches available time.

The indicator of my portfolio becoming to large is that I am having difficulty reading all reports and announcements for the stocks in my portfolio on a weekly basis. I currently work with 15 - 20 shares.

At least 80% of shares in my portfolio are fully franked. This either reduces my tax burden in high taxable income years or increased cash returns in low income years.

I gear the portfolio via a margin loan to magnify earnings. Gearing is kept in the 30-50% range to avoid margin calls.

The portfolio gearing level is varied in 30-50% range inversely with the overall share market P/E ratio range of about 15-20%. That is, if the market average P/E approaches 20%, the gearing should be approaching 30%.

When evaluating my portfolio management plan, you should consider your own risk profile, investment time horizon and investment objectives which may differ from mine.

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