How can I diversify my own investment portfolio and how do you guys source what stock to invest in?

Hi there.

I hope that your portfolio has grown well since you posed this question.

It's great that you want to be proactive in your investment. You can check what your level of investing experience is. If you have just started off, and don't have much experience, analysing and evaluating stocks can be a daunting business. You can try growing your stashaway portfolio first (it's already well diversified for you) while you learn more about stocks and businesses, before you invest in a stock of your own.

People train for years before becoming lawyers, accountants, doctors, athletes, engineers. And it's your hard earned money, you definitely want good outcomes. So don't be in a rush to buy your first stock. Take your time to learn the ropes.

Truthfully, it's difficult to pick stocks that will outperform markets in the long term. Not to say there aren't people who can (Warren Buffett), but it's not easy. For most retail investors like us, it's probably better to harness the power of markets for your investment. For the first few years of your investing journey, I daresay your precious time is much better spent focusing on your day job and spending time doing things you love with people you love.

In this case, you need to evaluate your own risk tolerance and objectives to indicate the suitability. For people who are interested in dividends, they are most likely geared towards local banks or REITs. For people who are interested in higher capital growth, they are most likely looking at technology or disruptive companies stock. Depending on what you are investing in, you would evaluate the stock in a different perspective.

For example, looking to invest in technology stock, I would just focus on certain criteria such as its moat, sustainability, relevancy, competitive advantage, leadership. I won't look at EPS or P/E so deeply because of its growth nature.

Diversifying is just to ensure you are not overly concentrated on a certain sector, so carefully pick different sector to diversify. For example: I could have invested in apple and facebook, and singapore local banks + reits. However, if you are doing your own stock picking, only diversification after you have done your research and not just for the sake of diversification, because any poor investment will just pull your portfolio performance down.