Registered: Jun 2009
01-14-12 11:50 AM
I'm not an investor ... I'm a trader. But if I were to invest I would stick quite closely to the advice in piezoe's post. Read THE BATTLE FOR INVESTMENT SURVIVAL, then reread piezoe's post, mix in two cups of a patience and bake for 30 years at 350. That is a winning formula ... a big winning formula.
Quote from piezoe:
The article is right with regard to the unsavory aspects of Wall Street, and the importance of avoiding high costs etc., etc. But the investment advice is bad nevertheless. The problem with index funds is they include too much stuff you should not own.
I've covered this topic in more detail in other threads so I don't want to repeat everything. I'll just summarize the conclusion without going into why, but there is sound reasoning behind this. You should use a Roth IRA for this to the maximum extent you can.
Take an index approach but but cast a wider net. Select from among only stocks that meet these two criteria at a minimum: 1) pay dividends and have an established history of raising their dividends, and 2) are in a long term up trend. Do not buy anything that does not pay a dividend. Examples: PHG, PG, SQM, DEO, XOM, STO, etc.
Buy casting a wider net I mean include stocks that would not be together in the same index. You can include any stock that meets your selection criteria even if it is over the counter, such as Roche for example. Make sure you have wide international representation and haven't emphasized any one country. You only need a few shares to begin. Reinvest all dividends. Review your portfolio once or twice a year but only make changes when absolutely necessary because the company no longer satisfies your criteria.. If the market goes down and your stocks go down don't worry about it, but if the market goes up and your stock doesn't worry a little, if the market goes up and your stock goes down find out why and consider making a change.
Don't diversify too much to the point where you lose track, and make sure no holding represents more than 10% of your capital. Ultimately when you've built your portfolio you want between ten and twenty stocks. That's it. No more.
Never take a brokers advice on anything. If you need help in selecting candidates use an independent rating service such as Morningstar.
This type of portfolio will beat the market and index funds in total returns, while allowing you to sleep at night. You can get rich in about 30 years by steady investment into this kind of portfolio.