Key takeaways:

• Multiple share portfolios can be used to target different investment goals

• It may be easier to monitor underperforming stocks in a portfolio when there is less noise' acting as a distraction

• Allocating separate capital to different portfolios is a useful risk management tool

Between new and experienced investors alike, many individuals look to accumulate a large share portfolio, without really identifying what might be the best way to frame their investment goals, monitor their progress, and manage their risk.

An often neglected strategy that deals with this pitfall is to create multiple share portfolios. Not only does this help investors deal with the psychology of investing, but it instills financial discipline.

Selfwealth members can make the most of their trading account by creating multiple share portfolios, each sitting under the same user login. 

So why might you consider multiple share portfolios? Let take a look at some of the potential benefits of this approach to investing.

1. Clear, Defined Investment Goals and Strategies

First things first, you can target different investment goals by setting up multiple portfolios.

These goals might include working towards a deposit for a house, accumulating enough for a child future education needs, drawing passive income through retirement, earning an income from active trading, funding lifestyle purchases, or building a nest egg.

With each of these possibilities in mind, it worth remembering that different investments align with reaching these goals. For example, speculative stocks are hardly appropriate for an individual looking to draw passive income for their retirement living. Therefore, you might choose to invest in different assets that support your varying goals. 

For example, a defensive (non-risky') portfolio could help target income. This portfolio might focus on ETFs, exchange-traded bonds, fixed interest and gold, and blue-chip stocks. 

However, a risk-oriented portfolio with speculative stocks might be suited to short-term goals for lifestyle purchases, like a new car. 

In effect, multiple portfolios help investors define a sense of purpose' to their investing. This approach helps establish what you are working towards, and it serves a motivational reminder.

don't forget, you can also set up different types of accounts with Selfwealth, covering individuals, joint holders, companies, trusts, SMSFs, and even kids investing accounts.

2. Fine-tuned Performance Monitoring

Separate share portfolios allow you to measure and track your progress towards meeting your goals at any moment. It is a useful approach to generate insights that may influence your decision-making, including any portfolio changes that might be necessary to meet your goals.

A multiple-portfolio strategy also helps remove some of the noise' when monitoring a large portfolio. 

Quite often, investors hold blue-chip stocks and a sprinkling of risky, speculative shares in the one portfolio. When all of these stocks are held in the one portfolio, it is easy for the performance of the blue-chip stocks to mask' the performance of the speculative holdings. The same applies where a large weight of the portfolio is invested in just one or two stocks, out of a much larger number.

The principal outcome of these scenarios is that investors may neglect to monitor the performance of smaller, more volatile holdings.

As such, from a psychological perspective, it is easier to assess the performance and contribution of these stocks when they are held in a separate, dedicated share portfolio. Greater clarity in the way of performance monitoring can be useful for investors to identify underperforming stocks.

3. Improved Capital and Risk Management

Capital allocation is one of the most important principles of managing a share portfolio. When you have just one portfolio, it is often tough to decide where to deploy capital, especially if you hold a diverse range of stocks. 

Things are slightly different if you have multiple portfolios. The first thing you will be guided by is how to split your capital across multiple portfolios. 

However, your investment goals, risk appetite, and portfolio exposure will shape this decision. Maybe you decide to allocate capital across two portfolios on a 60-40 basis, or if you have three portfolios, perhaps you spread the money 60-20-20. 

The exact breakdown is not the lesson here. Instead, it is the approach based on a predetermined allocation. This rule' determines where savings will be invested, and it can help you avoid investing too heavily in one area. If you are in the habit of trying to catch a falling knife, this approach may play an important role in reframing the way you manage your portfolio to maintain diversification.

With capital assigned for a specific portfolio or investment purpose, investors can improve their trading discipline. So long as clear goals are in place, they are also less likely to make impulsive investment decisions. 

In many respects, multiple share portfolios assigned separate capital may assist manage overall investment risk, but as always, portfolio rebalancing remains an important factor to consider.

Final Thoughts

Although it may seem as though multiple share portfolios entails more admin, this approach may be more efficient for a number of investors. 

Selfwealth members can open multiple portfolios via their trading accounts. Establish different goals for each portfolio, providing you a clear understanding of what you are investing towards. 

Furthermore, the ability to monitor these goals in isolation, and the supporting strategies behind them, represent powerful checks and balances to keep you focused while managing capital and overall investment risk. 

Why not open another share portfolio with Selfwealth today?