I’ll show you in this post how to build your portfolio and what returns you can expect.
It is a very, very theoretical exercise, but it serves as a basis for you to guide yourself.
There are three things you have to take into consideration when setting up your portfolio:
1) The expected returns.
2) The standard deviation of these returns.
3) The correlation between these returns.
To not get too much into theory, I’ll streamline an easier way to do this, and this is how I do it for myself, calculate yours this way to experience:
My portfolio BRAZIL:
25% fixed income
15% real estate funds
I expect to have a return of 12% a year on stocks, 11% a year on a fixed income and 10% a year on real estate funds.
Putting in the account and by the proportion of each:
To help in the calculation multiply for example 60 * 12 and the result divided by 10,000 (ten thousand).
60% * 12 (shares) + 25% * 11 (fixed income) + 15% * 10 (real estate funds)
0.072 + 0.0275 + 0.015 = 0.11145 or + 11.45%
My portfolio abroad:
I expect to have a return of 8.5% per year with stocks and 6% per annum with REITS:
90% * 8.5% (stocks) + 10% * 6 (reits)
0.0765 + 0.006 = 0.0825 = + 8.25%
Now my global portfolio:
50% * 11.45 + 50% * 8.25 =
0.05725 + 0.04125 = 0.0985 = + 9.85%
This value of + 9.85% is the expected value of the portfolio’s annual profitability as presented, but remembering that my allocation at the moment is not pretty according to the theoretical model because I do not have REITS and my fixed income and real estate funds Are not in that proportion still represented, and besides, my portfolio abroad is still very much in the beginning and not even 5% of the portfolio yet, who will say 50%.
That’s a pretty cautious and conservative estimate.
For example, I started the year 2017 with R$ 1 (U$330,000) million invested, if I had already done everything according to the ratio I defined above, I would expect to see the equity adjusted by at least R$ 98.5 thousand over the year to reach this profitability Which I estimated, including clear all rents, income, dividends and dividends being reinvested in the amount.
The fact is that at the moment I’m still very focused on stocks in Brazil.
Currently, my allocation is like this:
10% real estate funds
15% fixed income
Abroad 100% stocks
For the above-mentioned proportions, you should realize that you should give more than 10% of this year of expected profitability, that is, I expect the portfolio to increase its value by at least another R$100,000.00 (U$33,000) of course without any new contribution, of course at the expense of Large volatility of bovespa (São Paulo Stock Exchange) and the portfolio that remains at high risk due to this allocation.
My plan is to gradually reduce this risk during this year, contributing to fixed income, real estate funds, stocks, and reits.
Then I can supplement the post and add more useful information. I have a cold here and I need to rest.