The allure of living forever has caught the imagination for millennia.

While we know that there is no fountain of youth for humans, the same can't be said for investment portfolios. In fact, it's actually possible to build an investment portfolio that will last forever.

When you build a forever portfolio, you don't have to worry about outliving your money. The right investment portfolio offers you the chance to build and live off that wealth indefinitely.

Part of the forever portfolio is building your investments so you won't need to touch the principal. That's exactly what my colleague Elliott Gue strives for when he talks about 'forever' stocks in his StreetAuthority's Top 10 Stocks newsletter. He's convinced that the simplest way to turn any amount of money into a windfall is to find a stock you want to hold forever, invest, and then forget about it.

So how does it work? There are four steps.

Let me explain...

1. Consider The Big Picture.

A forever portfolio is one that takes into account the big picture and the long haul. You can't expect to see long-term results if you don't invest with the big picture in mind. This means taking a long view of your portfolio and the markets. Don't construct a portfolio based on the volatility you see in the markets on a daily, weekly, or even monthly basis.

Instead, you need to look at your own long-term goals. What do you hope to accomplish with your investment portfolio? Don't panic when the market has a bad month (or even a bad year). Look at the big picture, and keep that in mind.

Selling when your investments are low and incurring transaction fees that can erode your real returns are both things that can ruin your portfolio, cutting its effectiveness and adding to the risk that you will outlive your money.

2. Add Income Investments.

If you want to keep your investment portfolio replenishing itself, consider well-chosen income investments. In fact, one of the main things Elliott Gue looks for in picking his Top 10 stocks is a 'fat dividend.'

Investments like these provide you with a regular revenue stream that helps extend the life of your portfolio. If you include income investments in your portfolio, you reduce the need to sell for capital gains. You can avoid liquidating your investments and possibly dipping into your capital with help from income investments. The less you need to use your capital, the better off your portfolio will be.

3. Pay Attention To Asset Allocation.

Asset allocation is an important part of portfolio construction. Base your desired asset allocation on your goals, as well as what is most likely to provide your portfolio with staying power. For example, if you are in the growth stage of your portfolio, you need to have plenty of stocks and other assets with higher potential returns. Later, you can shift your asset allocation to preserve your capital and focus more on income.

Part of paying attention to asset allocation is rebalancing as needed. Regularly review your portfolio and determine whether or not your allocation fits with your needs and goals. At some point, you will likely need to rebalance your portfolio so that its composition matches your preferred asset allocation.

4. Sell Only With Good Reason.

A forever portfolio requires that you sell assets only when you have a good reason to, something Elliott, Warren Buffett, and countless other investing luminaries advocate. Selling because the market has crashed is not a good reason. Instead, analyze the fundamentals of your investments to determine if anything has changed.

Sometimes change is necessary, though. Good reasons to sell include:

  • It's time to shift your asset allocation, so you need to sell an investment so you can buy a new one in a different asset class.
  • Your portfolio's allocation has drifted, and you need to sell in order to bring it back in line.
  • Something has changed fundamentally with the investment, and you need to cut your losses.
  • There is a similar asset that is likely to do a better job in your portfolio.

Frequent turnover can be a real portfolio killer, so it makes sense to sell only when you have a very good reason to do so.

The Investing Answer: A forever portfolio is one that you can count on for years to come. Building one requires a long-term strategy. Open an investment account with a brokerage, and begin making regular investments into a carefully constructed portfolio. Stick to your long-term investment plan, and you will have a better chance of outliving your money.