The Mindful Investor: How a Calm Mind Can Bring You Inner Peace and Financial Security

Chapter 7. Portfolio Construction

Once you and your advisor have created a plan and determined an initial asset allocation that works to meet your goals, you'll need to begin choosing the actual investments. In this chapter we discuss the component parts of a portfolio and why, when combined, they can work together to reduce risk while maintaining return. We will also use this chapter to give you an understanding of the basics of investments, so that you can maintain focus and continue to make good, confident decisions even when things seem to be going the wrong way or when you're overcome by contrary suggestions.

It's important to review your mission statement at this stage. Remember that one of the reasons you developed it was so that you'd be able to assess opportunities and options as they arise. A great opportunity that's inconsistent with your mission statement isn't really an opportunity at all, because accepting it would take you off course. Your goal is to make financial (and life) decisions that are important and meaningful to you, so be sure to keep the five hindrances in mind and avoid falling victim to societal pressures.

As you meet with your advisor to discuss the options available to you, do your best to remain in the present moment. Listen mindfully to the information being presented, and resist the temptation to get caught up in your own thoughts (chapter 8 has more information on Mindful listening). It's important to your success that from the very beginning you ...