Diversification a key to managing portfolio and stress level
Uncontrollable factors – unemployment levels, inflation, interest rates and consumer confidence – help steer the direction of the economy. But local investors say simple planning will help you stay afloat while the stock market surges to the swell of economic indicators.
“You always need to maintain a well-diversified portfolio – that’s the key,” said investment advisor Tim Buscher, of First Allied Securities. “You should have some international mutual funds, some blue chip stocks in the big companies and some technology stocks for growth.”
Investment broker Greg Herback, of Edward Jones, advises to stir up the pot even more.
“A diverse portfolio has tech, health, financial and retail stocks, and about 10 percent international investments,” Herback said. “It should also have a good mixture of stocks and bonds, although a lot of people have just equity portfolios these days.”
The drive for stock-only portfolios stems from the relatively low interest rates in bond markets when compared to recent returns in stock investments.
Herback said Tuesday’s swing in the Nasdaq Composite Index, which carries a lot of technology companies, has caused a shift in interest among investors, mostly away from the tech sector.
“There was a big run Wednesday in the touchy-feely stocks – things that people can actually touch as opposed to cyberspace,” he said. “That was the reason for the rise in the Dow Jones which has more of those types of industries.”
He said when making an investment always look to the leaders of the industry.
“Buy into quality companies that have proven earnings,” he said.
After the investment is made, Buscher said it’s wise to be patient.
“To be fair to a company you should give it one to two years as long as the company is doing well financially,” he said. “People give up too soon, they expect overnight success and that’s not fair to the equity markets.”
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