Can Your Portfolio Perform When it Matters?
By Ronald L. DeLegge
February 10, 2010
SAN DIEGO (ETFguide.com) – Professional athletes like Derek Jeter and Kobe Bryant are clutch players. That’s because at crucial points of the game, when the pressure to succeed is the greatest, they almost always come through with a big play.
Anyone can shoot goals, make baskets and hit home runs when the game isn’t on the line. What about when it is? How about your investment portfolio? Is it built to make money when it matters most?
Ever since the 1990s ceased to exist, turning a profit in the stock market has become an elusive feat for the common man. Back then, people from all walks of life were making money hand over fist. It was easy. Remember your barber? The formula was simple. Putting all your money in stocks all the time was the only way to make a buck. What about today?
How have people with that sort of previous mentality done today? Anyone that put all their money in an S&P 500 index fund (NYSEArca: SPY) ten years ago should congratulate themselves. Today they have 25 percent less money. What about the people that placed their bets on the technology sector? Today the Nasdaq Composite (NYSEArca: ONEQ) sits 2,800 points or 55 percent below its illustrious peak of 5,132. Put another way, a $100,000 investment in the Nasdaq is now worth around $45,000!
Financial Disorders that lead to Disorderly Results
How does someone turn a $1 million investment portfolio into half-a-million? Having an acute financial disorder would probably be a good start. And there are too many disorders for me to list, but they’re all too familiar.
For instance, an overly bullish opinion on the market has burned seemingly everyone in sight minus the analysts like Abby Joseph Cohen that collect a paycheck from promoting it. What about the laughing hyena who in front of a national television audience yelled, “Bear Stearns is fine. Quit being silly!”
Likewise, I conservatively estimate that an overly bearish opinion on the market has nuclear bombed plenty of folks and maybe even more.
Interspersed among these are individuals that over-diversify, under-diversify, buy at the wrong time, sell at the wrong time or just bury their money in the backyard. No wonder they can’t get their portfolios to perform!
Location, Location, Location
It’s been said the three most important things to successful real estate investing are location, location and location. For example, who would build their home on a railroad track? Or who in their right mind would construct right next to a dynamite factory? Who would choose a volcanic base as the safest place to construct a house and raise a family? It doesn’t make any sense, but people tried it.
The place where you choose to lay your portfolio’s foundation is of vital importance. Structures built in dangerous locations don’t usually survive and neither do investment portfolios. Have we already forgotten what happened to the people that lost their shirts on “can’t miss opportunities” like Florida condominiums, auction rate securities, Internet stocks (NYSEArca: FDN), publicly traded hedge funds, high yielding promissory notes, mortgage REITs (NYSEArca: REM) and other financial rubbish? When will we ever learn?!
Before you can get your portfolio right, you must first get your mind right. Tricking yourself into the false belief that your money will take care of itself is no way to get ahead. Entrusting your portfolio to Wall Street’s broken ways won’t help you either. What you sow is what you’ll reap. And by sowing doubt and fear, how can you ever hope to get ahead?
Our model ETF portfolios are posting gains, even though stocks and commodities (NYSEArca: GSG) are floundering. Getting the right mix of investments doesn’t happen by accident. Three of our ETF portfolios already have positive returns ranging from 2-4 percent and are poised for further gains.
How is your portfolio fairing? Will it perform when it matters most?