It's important to properly review your investment portfolio on a regular basis and ask: why do I own this ASX 200 share? Personally, I like to do this just before the end of the financial year as it helps me with my tax planning. I would also recommend doing something similar annually, bi-annually or every quarter, when results are announced.
Doing this year's review, I found myself asking the question, why do I own this S&P/ASX 200 Index (ASX: XJO) share? I discuss this share below, but first I feel it's important for me to define myself as an investor and outline my investment strategy.
My ASX 200 investor profile
- Demographic: Generation Y
- Investment time horizon: 50 years +
- Investing experience: high
- Risk tolerance: very high
- End goals: Join the FIRE (Financial Independence Retire Early) movement and go travelling. Pass on a financial legacy to my kids.
My ASX 200 investment strategy
Because I have such a long time horizon in which to invest, as well as minimal financial commitments, I'm able to be an ultra long-term, aggressive growth investor. My strategy is to build a highly diversified portfolio of quality growth companies with a lot of risk, but massive multi-bagger potential. I try to invest funds into the market on a monthly basis (or as close to this as possible).
I have been implementing this strategy for over half a decade now, which has seen my portfolio grow to nearly 60 active positions. But importantly, part of my strategy is to let my winners run and to concentrate the portfolio into about 30 meaningful positions. This is already starting to happen naturally. Currently, including roughly a 10% cash position, over 50% of my portfolio is in 18 stocks. Take it out to 32 stocks and that's 70% of my portfolio.
So, why do I own this ASX 200 share?
Challenger Ltd (ASX: CGF) is a financial services company known for being Australia's largest annuity provider. With so much money in superannuation, my thesis was that our aging population would have growing demand for these types of products. As a result, Challenger could provide market beating total returns by investing funds under management. I also thought the company paid a decent dividend.
Challenger is one of the first shares I bought, back when I didn't have a proper strategy. Because of this, it isn't fully aligned with my current strategy of targeting growth. With interest rates at historic lows, it's also harder for Challenger to earn high returns on its funds.
I still think that the investment theme is true and Challenger is a leader in the space. The company also possesses some quality characteristics, but with interest rates so low it probably isn't the right fit for my portfolio right now. But, it may be for yours.
Foolish takeaway
I wrote this article to highlight the fact we are all constantly learning. I learn the most from my ASX 200 investment mistakes, not my winners. My advice is to invest based on your own personal circumstances and goals.
