How to Design an Investment Portfolio Using Your Favorite Brands


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As consumers, we all have certain brands that we like to use more than others – publicly traded companies like Starbucks and Costco are some of my favorites, for example. But what if, in addition to frequenting these companies, you could also build an investment portfolio around them?

Select details on how you can invest in the companies you already spend money with, as well as some tips to keep in mind when buying individual stocks.

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How you can design your own investment portfolio

Whether you recently started investing during the same era of stocks or if you’re a long-term investor who’s been doing it for a while, there are plenty of ways to continue building your net worth through the stock market.

While investing in your favorite companies can be fun, it’s worth noting that your entire investment portfolio shouldn’t just be based on picking certain individual stocks. Many investors would recommend using a 90/10 strategy, where 90% of your investment portfolio is dedicated to less volatile index funds that track the overall average return of the market and the remaining 10% is dedicated to individual stocks.

The idea is that 90% of your investments will produce a stable and solid return over the long term, while the remaining 10% can afford to be a bit more volatile. Think of it this way: In the worst case scenario, if your 10% allowance drops in value, that sudden drop won’t have a huge effect on your overall financial well-being.

Some investors even prefer to create their own fictional exchange-traded funds, or ETFs — buckets comprising several different securities — and name those investments after people with similar buying habits, hobbies, and tastes. For example, the Becky ETF, an ETF simulation that tracks a fictional index called the Becky 10 Index, contains:

  • Adobe Inc. (ADBE)
  • Apple Inc. (AAPL)
  • Chipotle Mexican Grill, Inc. (CMG)
  • Etsy Inc. (ETSY)
  • Facebook, now known as Meta Platforms Inc. (FB)
  • Lululemon Athletica Inc. (LULU)
  • Netflix Inc. (NFLX)
  • Pinterest Inc. (PINS)
  • Interactive Peloton Inc. (PTON)
  • Shopify Inc. (SHOP)

The performance of this particular portfolio is not to be overlooked. Between January 2015 and December 2020, the cheeky-named ETF gained 1,079%, while in comparison, the clearly-named S&P 500 index ETF only gained 84%. Additionally, in 2021, all but two of the included companies, Pinterest and Peloton, had a positive year.

However, 2022 has not been so favorable to investors. The Becky ETF 10 is down 35% year-to-date, and the biggest “loser” being Shopify is down more than 60% in 2022. However, the S&P 500 is only down 13% this year. Indeed, the S&P 500 index has much greater exposure across all sectors and companies, while the Becky 10 ETF is riskier and less diversified, as a single investment can significantly lower overall performance.

You’ll notice, however, that this ETF includes a mix of tech-savvy companies like Facebook and Apple, as well as mainstream brands like Lululemon and Chipotle. If you decide to create your own portfolio based on your favorite brands and companies, diversifying your investments across different sectors is a good way to go.

Another famous ETF that regularly makes headlines is ARKK (a real, tradable ETF), run by Cathie Wood, a famous investor and stock picker. The fund chooses companies to invest in with the common theme of “disruptive innovation”. Its top holdings in the portfolio at press time are Tesla (10%), Teladoc (6%) and Roku (6%). Although the fund has performed well over the past five years (up 121%), the fund was beaten in the market downturn of 2022, leaving it down more than 45%. Again, this is because the fund is so deeply focused on technology, which makes it more vulnerable if there are problems in a singular sector.

But whether you’re a fan of disruptive companies or just want to invest in your favorite brands, that doesn’t mean you shouldn’t do your due diligence. If you bought a Peloton bike during the pandemic and became a die-hard fan, it wouldn’t have been the best decision to invest at the same time (unless you bought and sold your stock before January 2021). The company’s shares have fallen and fallen more than 85% since their all-time high in January 2021. So before designing your own ETF, it is extremely important to do your research and be aware that you could lose a large part of your main investment.

Things to keep in mind when investing in individual stocks

Selecting the best brokerage account

There are dozens of brokers and brokerage firms available to help you invest in your favorite brands. But before jumping to the first option you read, consider a few important factors:

  • Costs: Each time you make a transaction, you may have to pay a commission. Consider working with brokers like Fidelity or Vanguard, which now offer commission-free trading options.
  • Customer service: You will need a strong customer service system to help you with any issues that may arise. With your money at stake, the last thing you want to worry about is the status of your investment.
  • User interface on web and mobile platforms: When shopping and trading, you’ll want to work with an easy-to-use website and/or app. You can open accounts with different brokerages to test the interface of each platform and find the one you like best before investing.

Here are some of our favorite brokerage firms and investment apps to get started investing:

TD Ameritrade

  • Fees/Commissions

    $0 commission on stocks, options and ETFs

  • Minimum account

  • Investment opportunities

    Includes Stocks, Bonds, Mutual Funds, ETFs, Options, Forex and Futures

Benefits

  • Great customer service
  • Intuitive trading platform
  • Large selection of mutual funds

The inconvenients

  • Some mutual funds charge high commissions
  • Free research may not all be relevant for novice investors
  • Does not offer fractional stock shares

Avant-garde

  • Fees/Commissions

  • Minimum account

  • Investment opportunities

    Stocks, Bonds, ETFs, Mutual Funds, Options, CDs

Benefits

  • Great customer service
  • One of the largest ETF and mutual fund offerings
  • Large number of mutual funds with no transaction fees

The inconvenients

  • $20 annual fee for IRAs and brokerage accounts, though investors can waive this fee by opting for paperless statements
  • Basic trading platform only
  • No robust research and data tools

Webbull

  • Minimum deposit and balance

    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. No minimum required to open an account or start investing

  • Costs

    Fees may vary depending on the investment vehicle selected. Trade without commission; regulatory transaction fees and trading activity fees may apply

  • Premium

    Get 5 free shares when you open and fund a new account: Sign up with Webull to get your 2 free shares, each worth up to $300, and deposit any amount to receive 3 free shares, each worth up to $3,000

  • Investment vehicles

    Brokerage account: Commission-free investment Webull IRA: Traditional IRAs, Roth, Rollover

  • Investment opportunities

    Stocks, ETFs, options trading, fractional shares, IPOs, ADRs, as well as some cryptocurrencies through Webull Crypto

  • Educational resources

Robin Hood

  • Minimum deposit and balance

    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. No minimum required to open an account or start investing

  • Costs

    Fees may vary depending on the investment vehicle selected. Trade without commission; regulatory transaction fees and trading activity fees may apply

  • Premium

    Robinhood will add 1 free share of stock to your brokerage account when you link your bank account and meet the terms of your promotion (you can keep the stock or sell it after 2 trading days)

  • Investment vehicles

  • Investment opportunities

    Stocks, ETFs, options trading, fractional stocks, IPOs, plus some cryptocurrencies through Robinhood Crypto (depending on where you live)

  • Educational resources

pay taxes

The type of account you invest in and the type of trading you participate in will impact your year-end taxes. For example, if you invest in a Roth Individual Retirement Account or a Roth IRA, all gains are tax-free as long as you don’t withdraw before age 59½.

If, however, you invest in a regular taxable brokerage account and regularly buy and sell stocks, any gains will be taxed at the ordinary tax rate. Note that if you hold shares for more than a year, you may pay less capital gains tax. To avoid disappointment and possibly higher taxes, consult a tax professional to plan an investment strategy that best suits your financial needs.

Budget before investing

Investing is a great way to build your net worth, but it’s extremely important to proceed with caution, take it slow, and “walk before you run”. Before investing in the stock market, it’s best to eliminate all high-interest debt, build a fully funded emergency fund just in case, and keep a solid budget in place.

At the end of the line

If you want to invest, consider doing so with the brands you already enjoy spending your hard-earned money with. Not only will you be supporting the businesses you love, but you’ll know you own a small portion of them. However, it is important not to bet everything on one (or a few) stocks and to have a diversified portfolio.

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Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.

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