Many investors build their portfolio with the same methods that they use to cook at home. Throw together a combination of ingredients in varying quantities to create a seemingly cohesive meal. Yet at the end of the day, they probably don’t think about carefully measuring how this result was achieved or what took place to bring these individual items to a tasty conclusion.

Having a sound portfolio management plan is achieved with the same measured approach that a perfect recipe might be conceived. It takes time, tools, and discipline to implement properly. Furthermore, there are important qualities that must be reasoned and balanced to fit with your long-term objectives.

I have written about many of these qualities individually in great detail. Nevertheless, it endures repeating how these important elements can make or break your portfolio.

1. Investment Style – It’s important to define your investment style so that you understand its strengths and weaknesses. Some investors buy-and-hold for the long-term, while others are short-term traders. There are trend followers, value investors, technical mavens, fundamentalists, short sellers, and many others.

There is no holy grail in the stock market. Each of these systems will have periods when they shine and periods when they fall flat. Yet if you know what the downsides to your strategy are, it will make it easier to ride out the difficult moments and avoid stepping away from your core beliefs during periods of stress.

2. Security Selection – Some investors are keen on individual stocks, while others love ETFs, mutual funds, or options. The merits of each can be debated at length, but how you research and assemble these positions together will be your biggest driver of risk and return. My personal preference is to use ETFs for their low-cost, transparency, diversified holdings, and liquidity.

Remember that risk is always a double edged sword. It cuts in both directions. The same drivers of volatility and downside price action can also create periods of swift and massive gains.