Portfolio Construction

Step one — what the money has to do

We separate the assets funding required spending from those funding optional spending. Required means the obligations you are not willing to renegotiate: housing, education you have committed to, the baseline retirement you actually intend to have. Optional means the version with more travel in it.

The distinction does real work. Risk in the optional bucket is a question about ambition. Risk in the required bucket is a question about whether the plan survives a bad decade. Most portfolios are built without ever making that split, which is why so many are simultaneously too risky and too conservative in the wrong places.

Step two — the risk that requires

Time horizon, liquidity needs, existing concentration, tax position, and the honest question of what you can hold through a drawdown without abandoning it. A theoretically optimal allocation you sell at the bottom is worse than a modest one you keep.

For executives there is a step most frameworks omit: human capital. If your income, your unvested equity, and your future grants all depend on one company in one sector, the portfolio should account for that, and it usually means owning less of what you already have.

Step three — the building blocks

A broad, low-cost core. Diversified global exposure across equities and fixed income does the structural work. It is intentionally unexciting.

Fixed income sized to the job. Bonds are held for stability and for funding near-term obligations, which shapes duration and credit quality more than yield-chasing does.

Satellites only where they earn their place. Any position outside the core is an explicit decision with a stated rationale, a sizing limit, and a reason it is not simply more of the core.

Cost discipline throughout. Expense ratios, spreads, and turnover compound against you as reliably as returns compound for you.

Step four — asset location

The same allocation can produce materially different after-tax outcomes depending on which account holds what. Tax-inefficient assets generally belong in tax-deferred accounts; assets with favorable long-term treatment or high growth potential are often better in taxable or Roth accounts. The right answer depends on your current bracket, your expected future bracket, and your time horizon — and it changes as those change.

This is one of the few places where meaningful value is available without taking additional risk.

Step five — maintenance

Rebalancing on written triggers, not on a calendar and not on a view. Trading windows, preclearance, and any 10b5-1 plan constrain when this can happen for insiders, which is a reason to write it down in advance.

Tax-loss harvesting where it is worth the complexity, with attention to wash-sale rules across every account in the household, including a spouse's.

Annual location review, because brackets move and so does the law.

Documented reasons. Every position should have an answer to "why is this here." Positions that cannot answer it are how portfolios drift.