A Brief Description of “The Portfolio Mindset”

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There are a number of personality types. One type is the transactional individual. A highly transactional person seeks mostly transactional relationships and interactions. And they seek out “the process” because they like to understand a system or a network and leverage it. Like many things, this is a spectrum. Some people are somewhat transactional and some are purely transactional. A transactional personality leads to a transactional mindset. Typically, a transactional mindset means you are looking for something in return. This for that. There are pros and cons to transactional mentalities and relationships. Perhaps you are not very transactional, but you have a transactional relationship with someone. For instance, “When Mike and I get together, we drink a coffee and talk about sports.” It’s a true friendship, but it’s transactional. So just because an individual’s personality, or a particular relationship, is a this-for-that one doesn’t make it good or bad. It is what it is. But if you were in a sales position, you would be wise to add transactional skills. Beware though: if you are not a transactional person naturally, then there is a certain amount of friction that occurs when you act transactional. Decide if that’s okay for you. You’re almost certainly adding skills and participating in the workplace in ways that create some friction for you already. When there’s too much friction though, you want to quit your job or change your field. Highly transactional people may have a frictionless life in sales, but they’ll have friction elsewhere. C’est la vie. But having a transactional skill set is valuable. Most times people think of personalities as set, and that may be correct. But you can certainly add skills that transactional people naturally have.

So what’s “The Portfolio Mindset” then?

The Portfolio Mindset, briefly, is what investor-types use. I am not a psychologist, but I know the people in my life that think and act like investors naturally. Some of their characteristics are: analytical, delayed gratification and thinking long, re-investing, builders or curators, value-measurers, value-adders. These are pretty positive characteristics. Again, like many things, it is a spectrum. If you are so analytical that you cannot make a decision, that is bad. You don’t want “paralysis by analysis,” as they say. Another thing to watch out for is delaying gratification too much. Someone who overdoes this may be unhappy. Perhaps it is useful when managing money, but it isn’t great if you overuse it in your life. What if you never eat a cookie? It sounds funny, but those that delay gratification too much don’t treat themselves (and sometimes they don’t treat themselves well) because they can only think about the cost of that gratification. So I make the point that whether the investor-type comes naturally to you or not, you want to treat it like a skill, and add it to your bag of capabilities.

A very specific characteristic of the investor-type is what I call “The Portfolio Mindset.” Simply put, the portfolio mindset treats almost everything like a portfolio and only things that make that portfolio better should go in it. This can mean: stocks, bonds, real estate, crypto, and so on… but it can also mean nutrition, fitness, friendship, your subscription TV “watch later” list, and on and on. Investor-types don’t naturally take-on things that don’t make their portfolio better. At a minimum, they try to decide if it is on-par with what they like/want… or better. If it is sub-par then good luck talking them into doing it.

A Lot of People Can Relate to This Already

Believe it or not, a lot of people can relate to this, if even in a strange way, as sports fans. Good luck convincing a Cleveland Browns fan that the Pittsburgh Steelers game against anyone but Cleveland would fit their “entertainment portfolio.” They just don’t believe that entertainment makes their portfolio any better. They’d rather cut the lawn. So we all have a bit of this in us already in various ways.

My suggestion is this: add “The Portfolio Mindset” to your life. You don’t have to re-create yourself and try to be someone you are not. That would be a life full of friction, untrue to yourself, and overall unwise. But you can have a mode, a skill set, you use when the time is right.

Perhaps you’ve wanted to invest for a long time now. Adding “The Portfolio Mindset” to your life as an investor in stocks makes sense. It is clearly aligned with doing well in the stock market. You only want to put stocks into your portfolio that make it better. Say you want to build a portfolio of 10 stocks, well at the beginning you are really just laying a foundation. Don’t lay a crappy foundation. If you wouldn’t leave the portfolio alone for 5 years and be happy with your picks the whole time, then I would not add that stock. But remember, while I say stock I really mean company. You should be happy with the company you pick for 5+ years. You should believe in it, the work it does, the role it plays, and be able to sleep at night. That way, you will get through the ups and downs that The Business Cycle (here) intrinsically experiences. Be sure to think long when you build the foundation. You wouldn’t swap out parts of your foundation every day, week, or month would you? Perhaps over time you make an upgrade though because it makes sense.

“The Portfolio Mindset” is large and encompassing. So is a transactional mindset. But you can use the skills that naturally come with those mindsets to your advantage. And you don’t have to become a different person to do it. Pick something in your life to try out the portfolio mindset on. At the start of the new year health and wealth are at the top of many people’s minds already. Maybe choose one of those.

If you want to try “The Portfolio Mindset” out on wealth, then follow along, see what I do, read what I write, and apply it. Like any new skill it takes some getting used to. But “The Portfolio Mindset” is more like riding a bike than speaking Spanish. It isn’t very perishable. Once you learn it, you pretty much got it. That makes it a very wise investment of your time.

I hope this brief description of “The Portfolio Mindset” was useful. I want everything I do to be both valuable and useful to you.

Happy New Year!

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