What stocks do you recommend owning?

by admin on March 29, 2011

As an Investor Coach, I’m often asked the question:  Brendon—what should I own?  What should I buy?    My answer begins with why gamble or speculate picking stocks when you can own the entire market.

The traditional financial services industry-magnified by endless messages from the media—want you to believe this MYTH:   Investment advisers or registered representatives can consistently and predictably add value by exercising “superior skill” in individual stock selection-call it STOCK PICKING.

When you buy their recommendation—they’re paid a commission to sell you that product.   Of course they think it’s a good recommendation.

Consider this and begin to question this unquestioned answer of “STOCK PICKING”:

If you’d invested $100,000 in US equity mutual funds in 1973—your investment would have grown to $1,967,465 in 2007.  On the other hand, had your investment been in the S & P 500 index alone, your investment would have grown to $3,046,830.

REALLY?   Yes really.  Had you left the money alone and not moved it—that’s exactly the case.  Your wealth lost to mutual fund managers actively picking, buying and selling stocks for the average of all these funds would have been $1,186,385.

Should you ever have all your investments in one asset category like the S &P 500?  Absolutely not!

Consider this:  if the same $100,000 investment were allocated to a mix of all mutual funds—bond, US equity and international funds—this would have grown to $1,114,360.   Not bad—especially since your goal now includes the concept of diversification.

But now consider this approach—one that completely eliminates stock picking:  a structured or engineered investment portfolio—this type of portfolio doesn’t require picking individual investments, or owning retail mutual funds that rely on fund managers to do the same thing.   Instead, this portfolio would own entire asset classes, be globally diversified, provide market rates of return with reduced risk and given the investor these results:

the $100,000 would have grown to $2.8 million with a conservative 75/25 mix (a great mix for a retired client attempting to get rates of return in excess of inflation);

$4.75 million with a 50/50 mix;

$7.25 million with a 25/75 mix

and finally $9.3 million with a 95%/5% mix.

With the right investment strategy and coaching, you can eliminate speculating and gambling with your money.  You don’t have to rely upon picking stocks or retail mutual funds that pay a fund manager to do the same thing.

Take control by educating yourself, understand what market rates of return are and capture them with proven investment strategies.

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