Thoughts on Future Stock Investments

Last week I shared my taxable stock investments and my retirement investments. I haven't paid much attention to them this year except recognizing after a dismal performance last year that I needed to increase my exposure to small-cap and international investments.

I have been concentrating my 401(k) contributions into international investments to help align my asset allocation to where I think it should be. Given where I am at - I think a investment portfolio of roughly 40-50% large-cap, 25-30% international, 25-30% small/mid-cap is where I would like my entire stock portfolio to be.

I recently sold some IBM stock and believe once my temporary assignment is over I will start having a little extra cash each month that I would like to add to my stock investment portfolio. I need to start thinking about how I would like to invest this money in my taxable accounts.

I have been studying a couple of businesses - PrePaid Legal, USG, Ebay, Johnson & Johnson, Lowes and thinking about gaining more exposure to the emerging markets through an index fund or ETF. I know I need to continue to focus on my investments and strengthening my long-term performance is a priority. I need to become a better investor. I am not sure how I am going to proceed yet, but I hope to sharpen my pencil and get to work in the next couple of months.

I'm hoping the stock market will tank between now and then to make this easier for me :-).

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Comments (8)

I'm telling you if you want some stock performance out of the norm, you gotta look at some food stocks. I've been studying Domino's for sometime now and they boomed big time.

Posted by Jeremie Beaudry | November 13, 2006 11:37 AM

Forget the stocks, pick a strategy and stick with it. IMHO Decide whethere you want to be a value investor, growth investor, technical trader, momemtum trader. It has to be something that matches your personality and wit. All styles make money, just that most people lack the dicipline to follow thru and try to chase all styles and end up with no style.

Posted by steve | November 13, 2006 5:03 PM

I suggest 'The Intelligent Investor' and 'One Up On Wall St'. Brush up on those and read Berkshire Annual Reports for other "wisdom".

Posted by Mr P | November 13, 2006 5:41 PM

Watch out for performance chasing--it can cause big problems in your portfolio and performance.

Posted by Nagel | November 13, 2006 7:31 PM

I like your breakdown on your desired portfolio.

In todays market, this is what I got out of prudential. My advisor told me that a moderate investor (which I claim to be) should have a portfolio that looks similiar to this...

60% Large Cap Stock
15% Small Cap
10% International
10 Fixed Income
and 5% Mid-Cap

I think you will be happy with your decisions.

Posted by DD | November 13, 2006 7:45 PM

I wouldn't say that one has to stick with a specific style/strategy to win in the stock market. It's never bad to attack the market from different perspectives depending on the situation. In this overbought market, you might want to hold a bit more cash and hold onto your more stable and discounted large caps while waiting for the market correction. In a super bullish market like the one that has lead up to the current state of affairs, what would have been wrong with a little bit of momentum trading? Flexibility as well as discipline make for good investing. With the amount of money you invest, you could even take advantage of breaking your portfolio up into "mini portfolios" with each designed to use a different strategy to offer a different risk/reward level. It would take more effort, but I bet you would get some very healthy returns.

I can't say for sure how one should go about becoming a "better investor" but I think a great way to start is to really go back to the basics and understand the tools and information available to you (charts, annual reports, screeners, etc.) and work on gaining your own intuition on using them.

I just started an investing blog (the one linked to my name... duh) that hopes to do that, but I'm sure that a lot of the posts are on things you already know but take a look maybe you'd like something. I hope it can be of some help as I've already learned a ton reading your posts. I'm in college and haven't really embarked on my personal finance journey but I know I'll be following this blog for tips and hints as long as you keep writing!

Posted by Dan | November 13, 2006 8:27 PM

It doesn't hurt to continue to learn about investing, more education the better, but I have to disagree with the use of "different perspectives" in your investing style, If i interpreted what you're saying correctly.

Here is my point in sticking to a strategy, for example, If you were a value investor, you may decide to sell if your stock is overvalued, a change in company or external fundamentals.
If you were a trend trader, you would not sell even though its overvalued, you may hold onto the stock as the trend continues, using your technical metrics to decide whether to stay with the stock.

What I'm trying to say is, depending on your style, that style/strategy dictates how you move into an investing and how it takes you out. You would not see buffett using livermore's strategy and vice versa.

Investing/Trading is the hardest thing you will do in your life, don't make it harder than it already is.

Posted by Steve | November 14, 2006 1:12 AM

Below is my allocations for the next 1-2 years, I will reexamine every 6 months to see if I need to change.

45% Large Cap Stock
35% International
20% Small Cap/Mid Cap

With the rise of small/mid cap stocks over the past 6-7 years I am looking for the Large Cap stocks to pick up since they have been lagging. I see a very strong rise in Large Cap stocks over the next 2 years, and have moved a large percentage of my portfolio into them. 20-25% of my Large Cap portfolio is in the S&P 500. The remainder is spread across 2 Large Cap Funds with Betas similar to that of the S&P 500 with a small percentage o fixed income mixed in.

I have 35% of my portfolio in just one fund. The fund is the Janus Adviser International Growth Fund. I've been invested in this fund for the past 1-2 years and see more growth to come. This fund is in my 401K, and I only have 2 International Funds to choose from. I do see growth in the future from Europe, South Korea and Russia.

The remainder of my account is in the Small Cap/Mid Cap sector. I probably have around 10% in each. I don't want to bet everything on the Large Cap/International, so my remaining 20% in this area should give me a good rounded portfolio for my LONG Term strategy.

I am only 30, so I have many more years before I plan to retire.

The only thing I would consider doing different is replacing some of the Small/Mid Cap with fixed income, but I believe over the long term my portfolio allocations will have larger gains.

Posted by Ray | November 15, 2006 12:13 PM