If You Must Invest In Individual Stocks Please Take Our Advice And Go Big

Category: Finance.

This month marks one of the worst Januarys in the history of the stock market. It seems like anything our friends at the all mighty Federal Reserve try to do misses the mark every time.

With the housing bubble bursting and the dollar fading the future for US investors doesn t exactly look promising. Is it time to shake things up in Mr. If you share my opinion we need a large helping of both and if we don t, a portfolio fortification is critical. Bernanke s fleet of Harvard economic geniuses, or does congress need a slap in the face and a lesson in long run economics? In the likely occasion of a recession in the near future few investors cannot afford to ride this terrifying roller coaster out. First off most advisors are suggesting less equities and more debt investing. A major revamp of your portfolio needs to be on the top of your financial to- do list.

We all know what that means. Here were going to do something a little different then what the typical investor would think of doing. Get out the less glamorous yet notably more secure bond list. Instead of investing in the usual 10 year T- bill, we are going to go the other direction. This accounts for anywhere between 10- 25% of your portfolio the next step is figuring out what to do with the rest. Moving about 15% of our portfolio into more profitable corporate bonds can add the necessary security needed, with about a 2- 5% larger ROI compared to your average treasury bond. With a recession impending on the horizon one awful truth is imminent.

With this alarming truth comes the necessity to start preparing for an extended period of time without an income source just in case. Company earnings will start to contract and with earning contraction comes employment contraction. If you feel like there is even the most remote chance of termination you will need some cash put aside that is readily accessible in times of distress. Let s say that at the very most 10% of your portfolio should be some form of cash or any other easily accessible investment depending upon your net worth. The general norm is to have at least six months worth of living expenses set aside in an extremely liquid account. With the safest investments out of the way lets move on to more profitable/ secure investments.

Investing in foreign companies seems to be the most logical way to go when the US is teetering on the brink of a recession. We re going to steer away from owning to many individual stocks in this volatile market so the next areas we will look into are mutual funds and ETF s. Finding mutual funds that invest heavily in companies in China and other emerging markets have the most promise right now. ETF s focus investments on an entire market sector such as energy, agriculture and so, technology on. ETF s, emerging market funds, also offer a very nice blanket of diversity. Investing anywhere from 20- 30% of your portfolio in these particular vehicles will provide you with optimal security and diversity.

These investments focus on stocks that do particularly well historically in times of ill market conditions. Recently looking more and more attractive, are what some people deem" Sin Funds/ Vice Funds" . Unlike most stocks during a down turn in the market, sin stocks or vice stocks, earning actually increase. Vice funds offer a very unique intangible asset that is impossible to duplicate in times considerably rough markets. It s really a phenomenon most investors ignore. Focusing most of there investments on companies people tend to use more of when stressed and pinched for money, such as tobacco and alcohol, makes sin funds a very safe investment. As you can see individual stocks aren t exactly the safest investments for this market, but there are some stocks that are considered as relatively safe.

Committing up to 25% of your portfolio to a reputable sin fund could have you bragging to your friends while they are crying about how much money they ve lost in recent weeks. If you must invest in individual stocks please take our advice and go big. Companies like Coca- Cola and Microsoft are looking decent right now, but don t risk too much money on individual stock picks they re probably not worth it in the end. Large cap stocks seem like the only way to go right now, offering little relative risk. Hopefully we have provided at least a slightly enlightening way of invest your money securely in the uncertain near future. Value investing for the long term right now is your safest bet when it comes to stocks so steer clear of most growth stocks unless you know something I don t! Remember with every problem comes an opportunity so keep your eyes open for companies severely undervalued.

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