7 Essential Components of my Portfolio Operating System

Hello Technoids!

As I built my private equity firm, I’ve guided countless tech professionals to grow their wealth and manage it as a business, ensuring sustainability and purpose. 

Through this journey, I've seen firsthand the benefits of a structured approach to portfolio management.   I didn’t have it all together at first. I discovered what I was lacking during a sabbatical in 2019. 

In late 2019, I was burned out after a long, hard 18-year run in tech and needed some time away. At that point, I managed and earned some income from our multi-seven-figure portfolio. However, it was far from optimized and did not provide the desired results.  

I was struggling like many today:

• Not knowing what investment I wanted vs what I needed.

• Having no clue how to organize or leverage the right tools to manage it

• Unclear where to focus my time and effort to get my desired results.

I wanted a vehicle to help me achieve financial independence, but I had a lot of car parts and no idea how to build or operate it. 

During those nine months, I was educated on how to build out the core functions to run and manage my portfolio as a business.   

 I created Portfolio OS, a systematic process for architecting, building, and running your portfolio as a multigenerational business. 

In this article, I’ll share seven components of PortfolioOS with you.  This framework ensures you focus on maximizing returns and ensuring the long-term financial health of your family business. 

The Seven Components of Portfolio OS. 

#1: Define Your Legacy Statement and Vision

Many tech professionals struggle with creating a cohesive investment strategy.

The solution lies in defining a clear legacy statement, vision, and investing thesis for your portfolio.

For instance, crafting a legacy statement like, "To build a diversified portfolio that supports my family and contributes to societal well-being" can be used as motivation.

When I started managing my portfolio with a clear mission, my job became purposeful because I had a purpose in meeting that vision.

Then, I built out a clear investing thesis based on my 50/50 portfolio strategy. This gave me a clear target, and I aligned every investment choice with my long-term goals, providing clarity and direction.

Taking action on this step ensures that your portfolio reflects your values and has a clear direction. It is your blueprint!

#2: Invest in Ongoing Education

A common misconception is that once you have a sound investment strategy, you can just set it and forget it.

Continuous learning is vital for adapting to market changes, exploring new asset classes, and future-proofing your portfolio.

For example, I schedule to attend quarterly seminars on market trends and bi-annual workshops on new asset classes and investment strategies. This approach keeps me updated, enabling us to make informed decisions.

Ongoing education is crucial for staying ahead in the ever-evolving financial landscape.

# 3: Implement Operations Management (M-Q-Y Cadence)

Tech professionals often neglect the systematic management of their portfolios. The portfolio is often not prioritized as high as the 9-5 job. However, this is the wrong way to think about it.

Your portfolio should be considered your primary business, built for multiple generations.

Ignoring this can lead to missed opportunities and inefficiencies.

Instead, implement regular budgeting, forecasting, and review processes. For instance, we hold quarterly meetings to review performance metrics and yearly strategy sessions to adjust goals.

This structured approach ensures that every aspect of the portfolio is scrutinized and optimized.

Structured operations management keeps your portfolio on track and aligned with your goals. It is being run as any high-performing business should.

# 4: Build a Strong Team & Use Effective Tools

Many underestimate the power of a strong team and robust tools and try to do it themselves.

Trying to do everything yourself can limit your portfolio's potential.

It is essential to hire experts in tax, accounting, and asset protection and utilize systems to maintain documentation, manage your portfolio, and generate metrics.

In my experience, having a high-caliber team and practical tools has allowed us to save time and make more money.

Focus your team on managing the day-to-day so you can focus on the areas of your portfolio with more risk and reward!

# 5: Track Key Metrics and Monitor Regularly

Getting lost in the sea of data available for portfolio performance is easy.

However, focusing on critical metrics like Internal Rate of Return (IRR), Cash on Cash (CoC), and Liquidity Percentage can provide clear insights.

For example, we set targets for IRR at a minimum of 12% and maintain liquidity at 15% to ensure flexibility and risk management. Tracking these metrics helps us make data-driven decisions and maintain financial health.

Regular monitoring of key metrics ensures that your portfolio is on track to meet your goals.

Hold your performance to a high standard, and even when you fall short, the result will maintain your missions; this is what all high-performing businesses do.

# Lesson 6: Develop a Robust Investing Skills and Strategy

A common mistake is not having a clear strategy for capital deployment.

Not having a clear investment thesis can lead to haphazard investment decisions where passion rules reason.

Develop a coherent investing thesis and stick to it. For example, we maintain a steady pipeline of potential investments and conduct thorough due diligence before deploying capital. This methodical approach has helped us achieve consistent returns even in a challenging market.

A well-defined investing strategy is essential for achieving your financial goals.

#Lesson 7: Plan for Succession

It is easy to overlook the importance of a clear succession plan.

Lack of succession planning can jeopardize the continuity and sustainability of your business.

Educate future generations and trustees about your portfolio and its management. Develop a clear plan for passing on the business to ensure continuity. For instance, we created a training program for our family members on financial management and portfolio operations. This ensures that the portfolio can be sustained beyond the current generation.

Succession planning ensures your portfolio’s longevity and legacy.

Remember

Managing your portfolio as a business ensures growth, sustainability, and a lasting legacy.

Start today by defining your legacy statement and setting up the processes outlined in this framework.

By following these seven steps, you will transform your portfolio into a well-oiled business machine, ensuring financial success and peace of mind. 

Your journey to financial independence and a lasting legacy starts now.

Does something like Portfolio OS sound interesting to you?

I am currently building out an education offering to teach this, if you want to hear more, hit reply and say, tell me more!

Tech Equity and Money Talk is a weekly podcast showing you how to work for tech equity as a wealth-building strategy and meet your financial goals.

056 🎙️ Learning to Manage Tech Wealth with Fred DeWorken

People often talk about IPOs and Tech Wealth through the lens of the highlight reel. They want to show off all the upside.

However, managing the money is not easy. More money comes with more complexities and, yes, more problems.

In this episode, Fred DeWorken and I have a real conversation about what it is like to manage the money after IPOs; check it out 👇️ 

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Disclaimer: This newsletter is for informational purposes only and does not constitute financial or career advice. Always consult with qualified professionals before making any decisions based on the information provided.