Substantial businesses mean they are able to be valued by fundamental investment criteria, and most will pay dividends.

Each day you should ask yourself: would I buy this stock today?

Your positions should be relatively large  in the context of the portfolio, ranging from 5%-8% maximum of the total portfolio at current prices.

We have many examples of both Small Caps and Blue Chips that are stable businesses.

Don't ignore Small Caps in this space. A lot of little companies are excellent quality businesses. 

Our Small Cap Portfolio holds aluminium product manufacturer Capral (CAA), the telecommunications group Symbio (SYM) formerly MNF Limited (MNF). We won't give all our Tier 1 stocks away here! 

This is the area where the pruning generally occurs. Don't be afraid to sell a stock.

The hope is that they grow into larger positions, like the speciality pharmaceutical  Medical Developments (MVP)  or the crane operator  Boom Logistics (BOL), which has already made a decent move.

Some stocks in tier 2 should give exposure to different risks for your portfolio, not reflected in the Core. For example you may like stocks that give you US$ exposure, or a small cap financial stock for alternative investment exposure, and a quality Small Cap miner.

Some stocks will have greater exposure to cyclical themes; while others are selected to offer good value, which can include paying substantial dividends.

These stocks can really grow! You never know your luck and these small companies can grow into stable Tier 2 businesses.

We have to be readily prepared to lose that sort of money with no regrets. Nobody, not even Warren Buffett or [INSERT THE NAME OF YOUR MOST ADMIRED INVESTOR HERE], gets them all right, even in bull markets. 

One key to making money is minimising your losses, which means not investing too much initially.

A successful investment portfolio is by definition one where your mistakes aren’t big enough to damage below the waterline.

With smaller positions you can start to build up as your confidence in a stock grows.

We have started building up exposure to newer industries, and emerging business models. 

A combination of ASX Blue Chips and quality Australian Small Cap stocks

There are over 2,200 listed companies on the ASX and the biggest seven represent about half of the $1.3 trillion dollar market capitalisation. These are the big four banks, Rio Tinto and BHP Billiton and Telstra.

There is a place for both investing in Blue Chip stocks and Small Caps in a portfolio. Blue Chip stocks at the big end of the spectrum definitely have the advantage of being less likely to go broke. The financial crisis proved that point.

At the Small Cap end, although there is more volatility, there is more diversity, and more potential to boost your portfolio’s returns.

It’s must easier for a company with a market cap of $100 million to double and triple in value, than it is for one that is worth $1 billion.

When you build up a holding in a stock over time, you will buy at different prices. Dollar cost averaging is the average price you have paid. This can be a profitable trading strategy.