In the earlier post I discussed about the goals that I have for my dividend portfolio. In order to achieve that goal, I have come up with few guiding principles and framework that I follow and strictly abide by. While I have been dabbling with investing for sometime now, I always had certain criteria at the back of my mind. I never had it formalized and documented resulting in lack of investing discipline. In this post I am presenting (and hence formalizing) the guiding principles and framework that I use to construct and sustain my income portfolio. I came up with these rules after quite a bit of reading on personal finance and understanding the implications on my financial goals. These are the rules that I use for managing my income portfolio.

1. Maintain portfolio asset allocation that is diversified in asset class, industry sectors, style maps, and geographical region.

2. Focus on growth of portfolio’s income cash flow – asset class that consistently pay and grow dividends.

3. Invest in companies that I understand, has good fundamentals, and industry leading position.

4. Make use of savings, certificate of deposits, bonds, stocks, etc., for asset allocation purpose.

5. Any individual security should not be more than 5% of dividend portfolio.

6. Buy only at discount – do not buy at historically high levels.

7. While buying a security do following:

- Identify the role it plays in the my income portfolio.

- Monitor its progress with respect to its role.

- Exit the security from income portfolio if it does not meet its role.

8. Income growth investing is long term process. Do not react on media news and sky-is-falling scenarios. Be patience and remember that “slow and steady wins the race”.

These rules provide me the framework for my portfolio management and help me adhere to my overall objective. Since this blog spot is also a platform to continue the learning process, I will be open to adapting these rules.

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