Michael Lipper: what I look for when building a portfolio
A well-balanced portfolio should chime like an orchestra, says the Wall Street veteran, but is achieving this an art form or a happy accident?
by Michael Lipper on Jan 28, 2013 at 09:16
One of the distinguishing characteristics between many individual’s portfolios and those that are professionally managed is whether the individual positions fit together to achieve one or more specific purposes.
In my own personal portfolio is a collection of securities that came to my attention from time to time after taking care of my professional responsibilities.
As a professional whether building a financial services individual securities portfolio or managing accounts investing in diverse mutual funds, hedge funds, and in some cases separate accounts, I construct individually-focused portfolios.
If investing is as I believe an art form, the professional construction of portfolios is, if anything, a higher art form.
That great philosopher Yogi Berra is reported to have said that “One can see a lot by observing.” In a 12 hour spread I was exposed to two examples of a collection of individual components being selectively put together into a much more impressive and useful result.
Saturday night my wife Ruth and I attended a wonderful concert by the New Jersey Symphony Orchestra.
For their second number they beautifully played nine selections from Sibelius’s “The Tempest” which were aided by members of The Shakespeare Theater of New Jersey, with speeches and acting from Shakespeare’s The Tempest.
The various musicians and actors all contributed their specific talents to a sterling performance. (I am biased as Ruth is the Co-Chair of the NJSO.)
While listening to each individually would have been pleasant, the combination of the music and the words produced a unified experience under the skilful direction of conductor Jacques Lacombe.
The next morning in church, the second lesson appointed for this Sunday came from 1 Corinthians, and dealt with God’s assembly of humans and the mutual dependence of our various body parts, e.g., our hands, eyes, ears, etc., needed for us to function as a complete body.
These two experiences reinforced in me the critical need to construct and keep current portfolios that attempt to fulfil their specific missions. I believe this is particularly important now. This past week the S&P 500 rose to 1500, a level that has not been seen for five years.
Luckily for us as investors, the stock markets have marched to a different tune than what was being sung or perhaps wailed by many economists.
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