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Wednesday,
April 15, 2009
(Cont'd from
above)...
Jim (cont'd):
Should you
speculate… now I am
on record for years
saying that
speculation should
be a part of any
balanced portfolio…
I want you to keep
looking at your
fund, and that is
how you do it… but
one of the best
reasons to buy these
super risky stocks…
the single digit
names… is because
you are going to get
bored, you are going
to get bored with
the stock market…
this keeps you in
the game… if you are
interested in stocks
all by themselves
you don’t need to
own a $3 speculative
name… because you
are going to be in
the game no matter
what… but if you are
the kind of person
who is easily bored,
put to sleep by
finance… don’t want
to look at the show…
don’t want to read
the business
section… if it is a
stretch to have the
time and inclination
to do all the
homework that you
are going to have to
do… remember,
optimally 1 hour per
week per stock… to
maintain a good
portfolio… then
speculation does
make sense.
Now, sometimes like
in a bear market,
there just aren’t
that many good
speculative
opportunities… if
you are the kind of
person who courts
risk… someone who
likes to skydive
with their
portfolio… you need
to be able to curb
that desire when the
market is saying
that speculation
won’t work… you are
just going to keep
losing money.
Now, if you are a
conservative
investor, somebody
who likes things
boring… and when you
are investing for
your retirement, in
your IRA, or your
401K, two tools that
are indispensable
for retirement
investment… you
better at least
pretend to be
conservative… go
with the Heinz’s and
Coca Cola’s… then
you probably want to
stay away from the
high flying momentum
growth stocks…
because of
temperament… not
everyone is build
for high octane
stocks… and that is
okay.
There are plenty of
other ways to make
money… some of you
may want to own
income producing
stocks… for the
money that you get
from that stable
dependable dividend…
utilities… there are
plenty of stocks out
there that will pay
you a better yield
than treasuries and
also offer the
possibilities of
upsides… even if
they change the tax
laws… if you shrink
at risk… if you just
want a dull boring
portfolio… look for
stocks with high
yields… not to
mention buy backs…
you want to find low
multiple, that is
the price to
earnings multiple,
value stocks… well,
if you are more
aggressive… you go
for something else…
you go for growth
stocks… so
conservative, value,
dividend…
aggressive, then you
go for high multiple
growth… you have to
figure out what you
are.
I am agnostic here…
I just want to try
to find stocks that
will make you money…
but no matter how
good a play a stock
may be… if it is a
slow moving value
play, and you get
frustrated with it…
or a volatile growth
play and you get
panicked out of it…
you are not going to
make money… so
first, recognize
what kind of
investor you are…
and then evaluate
stocks accordingly…
for those of you of
a more conservative
bent… the technical
Wall Street
jibberish term for
what you are looking
for is called, and I
use this on the show
and I am mindful
that it is kind of
the stuff that goes
over some peoples
head, but it is
called capital
preservation… you
want stocks that
won’t lose you
money… you have
already made some
money and you want
to preserve it… that
may pay dividends,
and should go up
slowly and steadily…
that is what you are
looking for… more
than keeping pace
with inflation.
Risk lovers on the
other hand want more
capital appreciation
than capital
preservation… they
want growth… but
which ever you are,
you also have to
recognize that good
investors don’t do
just one or the
other… I like a mix…
if you are just
looking for capital
preservation, you
won’t make much
money… and if you
are just looking for
capital
appreciation, you
are liable to lose
it all… figure out
who you are.
Here is the bottom
line…
▼ ▼
▼ ▼
▼
 The
Bottom Line!:
The trick is to
recognize which kind
of investor you are…
stay away from
stocks that make you
too uncomfortable…
but also, course
correct… so that you
don’t go too far in
one direction or
another. Know what
you’re comfortable
with & invest
accordingly to make
Mad Money... Know
thyself… and know
what kind of
investor you are… be
comfortable with
your style and you
will not panic out
at the bottom… and
maybe you will even
sell at the top.
[verbatim recap]
▼ ▼
▼ ▼
▼
Jim went on after
this segment to take
questions from
callers, and
responded with his
comments...
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Q:
I just want to know
in this type of
market, is
diversification, do
you still do that in
this type of
volatile market?
Jim:
Alright, in a
volatile market
where there, you
know volatile is
sometimes just code
for losing money…
the idea is that if
you have all of your
eggs in one basket
and that basket gets
crushed… all the
oils at one point,
all the financials…
then you are
destroyed… you are
just destroyed, your
nest egg is
destroyed… if you
have some in each
different unit… like
a defense stock, a
defensive stock, and
a healthcare, food
and beverage, and
then maybe an
industrial, and
maybe an oil and
gas… you are going
to ride things out
better… you are
going to lose money
in a bear market…
you will lose money…
you will just lose
less than the other
guy… we have had a
bunch of bear
markets since I have
been in the
business… from 1,300
to Dow 14,000, the
diversified guys
stayed in… the guys
who were
concentrated got
shook out and missed
the big move… and it
is about missing the
big move that I am
concerned about.
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Q:
Hey as someone who
has lived and worked
outside of the box,
I think that it is
time to diversify
outside of equities.
What can you tell me
about some of the
more atypical
choices? Such as
fine art, antiques,
classic cars,
motorcycles vs. the
more traditional
route like venture
capital and real
estate.
Jim:
It is interesting
that you say that,
at TheStreet.com we
have this site
called
MainStreet.com where
I am trying to get
collectibles
involved… we had a
guy Gary Vandercheck,
who runs a wine
store near me, which
is really, really
fabulous, wine
library… and I think
that collectibles
should be part of
anybody’s portfolio…
it is really
interesting that art
has held up here… so
I think… look, I am
literally trying to
put together a list
of collectibles… but
I think that there
is room in
everybody’s
portfolio to have
something that is
collectible.. it is
obviously not a
stock, a nice hedge
against inflation.
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Q:
I am nearing
retirement age, I am
52, I have got about
approximately
$350,000 in my 401K
plan. And right now
I have it divided
into the S&P and the
top 100 funds, and I
also have it in
short term treasury
funds. I am looking
to determine if I
should diversify my
funds more into the
short term since I
am getting closer to
retirement, and I
want a little bit
more protection on
my returns.
Jim:
First of all, you
have done it very
right… second,
congratulations on
being able to save
all that money…
third, I want you to
up the treasury
component… because
you have said,
remember this is
about knowing
thyself… if you told
me listen I feel
like I am going to
need the money four
years from now, then
I would not up the
treasury component…
but you are worrying
about preserving
what you have… so
let’s take that
treasury component
all the way up, you
are about to retire,
to 50%… and then you
keep the S&P, which
is great
diversification…
that is the way that
you have to play it…
and congratulations
on playing the game
very well.
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[verbatim recap]
[end of segment]
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