Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
50% Mutual Fund A (medium cap stocks, 5 star Morningstar rating)
50% Mutual Fund B (small cap stocks, 5 star Morningstar rating)
I am looking to add 2 individual stocks, which would change my portfolio to:
25% Stock A
25% Stock B
25% Mutual Fund A
25% Mutual Fund B
basically equal weighted dollar amount
I am not asking for specific stocks, but what kind of stocks. I feel that I am pretty well anchored with the two mutual funds. Should I pick a blue-chip stock with a nice dividend? Should I go risky and pick a bank/financial stock? Should I go defensive and choose a consumer food/alcohol stock? Tech stock? Growth stock? Start up company?
What do you recommend? I'm 23yo, so I've got plenty of time...but not so much $$$.
You should never ever put 25% of your portfolio in one stock, even worse 50% in two stocks. It doesn't matter how young you are. Markets always come back, individual stocks not necessarily so.
If you want to play risky, then replace those individual stocks with ETF's or index funds in a beaten down sector, like natural gas or metals or housing.
You should never ever put 25% of your portfolio in one stock, even worse 50% in two stocks. It doesn't matter how young you are. Markets always come back, individual stocks not necessarily so.
If you want to play risky, then replace those individual stocks with ETF's or index funds in a beaten down sector, like natural gas or metals or housing.
I don't have enough money to invest in more than 2 stocks. I only want to add about $5k. I will continue to add to the portfolio over the years.
So you think I should stick with mutual funds, index funds or ETF's? I've already got 2 mutual funds that pretty much follow the market.
ETFs are traded like an individual stock but are sector based. So maybe you think pipelines will be a good investment but within that sector there will be individual stocks that do well and do poorly, perhaps even collapse. It's very hard to pick individual winners and even if you research it well there is no guarantee. Anything can happen.
At 23 you are certainly too young to remember when "sector funds" made a lot sense. Back when very few people knew what "computer networks" were and telecom was different than IT there were lots of ways to say "hey I don't know if MCI or GTE or Ameritech or Qwest is the best phone company, but I think all of them together are better than investing in an index that has companies like Sunbeam and Amalgamated Gypsum". In the intervening years basically EVERY company has been through MASSIVE restructuring and such SO for about the past decade (give or take) broad index funds were very tough to beat.
Now there are new forces at work. The new administration is likely to be FAR more "interventionist", labor unions are likely to be much more likely to flex their influence, stimulus efforts are likely to target traditional Dem strong holds. Pressure to merely provide the necessities of living is much greater. The way to respond to this is to invest in sector funds / etfs that group together the kinds of firms that are likely to outperform the broad indexes with low costs. I don't want to pay for some "wiz kid stock picker" that gets snookered by a management team that really is not as competent as they appear.
Individual stocks pretty much ONLY make sense if you can truly get info about the inner workings of a firm. If it turns out that the "public face" of a company is NOT how the place really works and you don't find that out until EVERYONE else does and the stock tanks faster than you can get out, what can you do??? At least with a sector fund if one firm was hiding a secret odds are good that the competitors will actually see their share price increase -- instead putting a bet on ONE firm you can essentially use a sector to make sure you are not overexposed to the other parts of the economy that are likely to get beat up...
You should NOT be investing in individual stocks! I've never heard of any RESPONSIBLE investment advisor say to put more than about 4% of your capital in any specific investment. I don't recall the exact number of stocks that it requires to overcome "individual stock" risk, 18 or so IIRC.
Diversify your mutual fund holdings. You have no large cap, S&P, or foreign. That's where the money should be going. Granted you "might" buy a Microsoft, Intel or Nike, but you'd be more likely to buy a Ford, Global Crossing or Enron. Stay with mutual funds.
I own two of them...nice dividends...recommend reimbursing them.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
