The concept of how to invest money in the best allocation within an equity portfolio is something that has confused and stumped investors for years. When should I raise cash? How much cash should I raise? When do I go back into stocks? My research over the years has shown the answers to these three questions to be relatively simple: Never. None. Stay invested. You might think that this sounds too risky, but remember that one of the hallmarks of my approach on how to invest money is take the market out of the equation to the greatest degree possible so that we can instead focus on owning stocks whose strong fundamentals and powerful buying pressure will give us the greatest possible reward.
One of the keys to reduce the stock market’s influence on your portfolio’s performance is to pay attention to what I call the 60-30-10 mix. Simply put, 60% of your portfolio should be in the most Conservative stocks, 30% in Moderately Aggressive stocks and 10% into the Aggressive stocks. My research has shown that this mix gives us the smoothest path to profits over the long run. In fact, when the economy is volatile, this tip could help in surviving a recession. It also keeps us invested at all times so we do not miss any profit opportunities by making incorrect guesses on the short term direction of the stock market.
The 10% Aggressive stocks are going to tend to soar when the market is rising. They literally turn into rocket ships and will tend to move up very quickly when the stock market turns higher. The Conservative and Moderately Aggressive stocks will move higher as well, but not like these rocket ships! Maintaining the proper 60-30-10 mix will have us selling these volatile names after they rise to the point where they represent more than 10% of our portfolio. Buy low, sell high. By contrast, the large concentration of solid Conservative stocks will offset the downside movement of the aggressive stocks in falling stock markets.
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والرد يحتاج بعض الوقت.
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