Beyond the Numbers: How to Build a Portfolio That Works for You
Most investors know they should own stocks and bonds, but that is often where the clarity ends. The challenge is not simply choosing investments; rather, it's about deciding how to combine them in a way that supports your financial goals, manages taxes, and adapts as your life changes.
We should know. Mana founders Cristina and Stephanie each spent more than a decade working in the asset management industry, a field built on designing the right mix of stocks, bonds, and alternative assets to achieve millions of distinct investment outcomes. That experience shapes the way we think about portfolios and how we approach the strategies discussed here.
Here is a framework you can use to think about your own portfolio decisions.
1. Decide on Your Growth and Stability Ratio by Considering Four Key Factors
Choosing how much of your portfolio should be in growth assets, such as stocks, versus stability assets, such as bonds or cash, is not just about your comfort level with risk. It also involves understanding your financial goals, resources, and constraints. Four factors to weigh together are:
Risk capacity – the amount of risk you must take to reach your desired outcome. For example, if you want to buy a home in five years with a $500,000 down payment but have $235,000 saved today, your required return is roughly 16 percent after tax. That is unlikely without significant additional savings. By contrast, if you need $150,000 a year from a $5 million retirement portfolio, your required return is closer to 3 percent after tax, which is achievable with a low-risk allocation.
Risk tolerance – the amount of risk you are emotionally prepared to take while still sleeping well at night. This can change over time and may improve with financial education and experience in the markets.
Time horizon – the number of years until you need the money. Longer time horizons generally allow for more growth-oriented investing, while shorter horizons call for greater stability.
Income needs – the amount of ongoing cash flow you expect from your investments. Higher income needs often require more stable assets, while lower needs may allow for more growth exposure.
Balancing these four elements creates a more realistic and sustainable portfolio. Too much focus on one and you risk falling short of your goals or taking on more volatility than you can handle.
2. Consider Direct Indexing to Reduce Taxes
If you have a large taxable account or a concentrated stock position, direct indexing can be more efficient than owning a fund.
How it works: Instead of buying an S&P 500 ETF, you own the 500 individual stocks that make up the index.
Why it helps: You can sell certain stocks at a loss to offset other gains, reducing your tax bill without changing your overall market exposure.
Bonus: You can remove specific companies or sectors you do not want to support.
Direct indexing can be highly effective, but it is also highly complex. This is not a strategy to attempt on your own without the right tools, technology, and tax expertise. It requires careful monitoring, precise execution, and ongoing adjustments to ensure the tax benefits are realized without undermining your investment goals.
Here’s an example of direct indexing in action: Suppose your portfolio realizes significant capital gains this year because you withdrew funds to purchase real estate. With direct indexing, a portfolio manager can look at each individual stock in your portfolio, identify those trading below their purchase price, and sell them to capture a loss. Those losses can be used to offset part of the gain, potentially saving thousands in taxes. This level of precision is not possible with a traditional index fund, where you own the fund itself rather than its individual holdings. Without the right systems in place to monitor positions daily, these opportunities are easy to miss and the benefits can be lost entirely.
3. Use a Bond Ladder for Predictable Income
Bond ladders are especially helpful for retirees or anyone who needs steady cash flow.
How it works: You buy bonds that mature at different times - such as one, three, five, seven, and ten years - so that a portion of the portfolio matures on a set schedule. Each year, when a bond matures, you can use the principal for spending needs or reinvest it into a new long-term bond.
How it reduces interest rate risk: Interest rate movements affect bond prices. When rates rise, the value of existing bonds tends to fall, but a ladder ensures you have bonds maturing regularly. This means you can reinvest maturing bonds at the new, higher rates instead of locking your entire portfolio into older, lower-yield bonds. When rates fall, the longer-term bonds in your ladder continue paying the higher interest rates you locked in earlier. The result is a smoother, more predictable income stream over time, without having to guess the direction of interest rates.
Example: If you have $500,000 to invest in bonds, you could split it evenly into five bonds maturing in one, three, five, seven, and ten years. As each bond matures, you roll that money into a new ten-year bond at current rates. Over time, you maintain a mix of short- and long-term bonds that adjusts naturally to changing market conditions.
4. Evaluate Alternative Investments Carefully
Real estate funds, private equity, and hedge funds can add diversification, but they also come with higher fees, lower liquidity, and more complexity. They should be considered only when they have a clear role in your plan.
This is where professional due diligence is essential. Before founding Mana, Stephanie led hedge fund and alternative investment reviews for an institutional investment firm. She looked beyond glossy presentations, and dug into strategies, fee structures, and risk exposures. That same level of scrutiny is applied to every alternative we consider for clients.
Rule of thumb: Do not invest in an alternative unless you understand exactly how it makes money, what could cause losses, and how it fits with your existing portfolio.
5. Keep Your Plan Flexible
A well-built portfolio is not something you set once and leave alone forever. It should evolve as your life does. Major life events such as selling a business, moving into a new career, starting a family, or preparing for retirement can shift what you need from your investments.
If your time horizon shortens, you may want more stability and liquidity. If your income changes or your tax situation shifts, your asset mix and tax strategies may need to adjust as well. The key is to regularly step back and ask whether your portfolio still matches the goals, resources, and constraints you have today. Small adjustments made along the way can help you stay on track even as life moves in unexpected directions.
Whether you do this on your own or work with a fiduciary advisor, focus on the strategies that matter most. Get the growth and stability ratio right, take a thoughtful approach to taxes, consider tools to help manage certain risks, and evaluate every investment for its true fit and purpose.
When these pieces work together, your portfolio is no longer a random collection of investments. It becomes a tool that supports your life, both now and in the years ahead.
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Stephanie Bucko and Cristina Livadary are fee-only financial planners based in Los Angeles, California. Stephanie is the Chief Investment Officer and Cristina is the Chief Executive Officer at Mana Financial Life Design (FLD). Mana FLD provides comprehensive financial planning and investment management services to help clients grow and protect their wealth throughout life’s journey. Mana FLD specializes in advising ambitious professionals who seek financial knowledge and want to implement creative budgeting, savings, proactive planning and powerful investment strategies. As fee-only fiduciaries and independent financial advisors, Stephanie and Cristina never receive commission of any kind. Stephanie and Cristina are legally bound by their certifications to provide unbiased and trustworthy financial advice.