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by WealthEffect Staff


How much to have in stocks?
  Two Portfolios: Conservative & Aggressive  
  Four Themes  

The first question you must answer is how much of your money do you want in stocks. To help you in this decision, we have prepared an Investor Worksheet. This worksheet takes into consideration how much you currently have in stocks, bonds and cash. Further, it considers how much more you will be able to invest in the next several years. Finally, for homeowners, it gives some weight to your unrealized profit (your "equity").

The suggested amount of stocks in your portfolio reflects two assumptions:

  • Stocks are more attractive than bonds or cash over time (if you're not investing for the long run, find a new web site)
  • Stocks are less attractive than usual (stock prices have been rising faster than earnings for almost two decades now)
  2. The Investor Worksheet also suggests a type of portfolio, based on your age and your risk profile. A Conservative Portfolio is primarily comprised of companies with sustainable competitive advantages and quality managements. This should come as no surprise, since it reflects the WealthEffect Strategy.

There should also be a few speculations included from the technology group — the thinking here is that, although individual tech companies are speculative, technology in general does have a sustainable advantage in our world. These tech companies should be dominant players in their industries. (Not all leaders are included, however, since some of them sell at unreasonable P-E multiples.)

An Aggressive Portfolio by our standards is very different than that of a day trader or trend follower. It would include both the names in the Conservative group and several additional speculations, as well. These additional companies should have strong competitive advantages which you believe are sustainable, even if you can't be sure. They should also have unusually attractive risk/reward profiles, in your opinion — if not, don't bother and don't look back.


Both portfolios should reflect several themes:
  • Affordable America — products which represent the best of our culture; a piece of the American Dream which is affordable around the world
  • Gray & Pay — an aging and affluent population make healthcare an attractive industry; with the increasing influence of managed care, disproportionate benefits will accrue to those who give the most bang for the healthcare buck
  • The Tech Wave — as indicated earlier, the extraordinary impact of technology will only grow, impacting and improving our lives in ways we can't imagine
  • Financial De-Revolution — the deregulation of our financial system from the restrictions imposed during the Great Depression still have a long way to go; the free market will tend to reward the best and brightest
Suggestion: Go to Investor Worksheet