I just attended a discussion with my Schwab regional manager for Trading Solutions. Without getting into too much detail, here are some of the points I took away from this discussion which was designed primarily to limiting risk. Naturally these strategy's depend on an individual's circumstances (risk tolerance, age, etc). To help imprint the points made I decided to write them down in a logical fashion(?). I am sharing what I took away …... hopefully you may find it of some interest.
Total portfolio = liquid net worth and is composed primarily of an Investment portfolio and Trading portfolio (different accounts). Do not include emergency cash (or perhaps physical gold and silver) in determining your liquid net worth for purposes of portfolio construction.
Equals approximately 20% of your Total portfolio (20% of liquid net worth) and is composed of anywhere from 2 to 5 equities (stocks). Where possible your Trading portfolio should be held within a tax sheltered account. Equities in your Trading portfolio should be frequently monitored with regard to risk/reward ratio (a 1:3 ratio is a good place to start) and downside risk should be limited through use of stop losses, trailing stops and/or technical stops. When initially adding an equity to your Trading portfolio a reasonable time frame to consider is 1 year.
Should be composed of ETF's, Index funds, bonds and to a lesser degree, equities considered core holdings (etc.). Leveraged investments should not be a part of your Investment portfolio. Monitoring these investments is needed but on an infrequent basis.