verify my long stock investment strategy for $100K?

Question

I have $100K to invest in the market (it's my retirement pensioin), I'm 46 yrs old.
1)Thinking NO mutual funds
2) Diversify between:
-Banks (financial) say ticker "TD.TO" on Toronto (banks always make money, TD is a major player and seems slightly undervalued. w/low PE and pretty good dividend)
-Oil exploration ticker "SLB" on NY (Schlumberger is established with real aggressive 1yr target, low PE and good dividend and major player with pretty good record)
-Energy say ticker "ABB" on NY (ABB because they have come out of the LOW Dark times after settling the major class action suit, they are key players in the energy field in emerging countries

3) 33% for each to yield $$ on increase

4) I'll go long and hold no problem

5) I am holding "NT" (lots of it) and I wonder if I should dump, when it looked bleak, I just thought I would hold for 10-20 yrs till it gains back some ground, I am interested in comments regarding NT, I bought at about $10 it's now around $2.50

?

Answer 1

I don't think you are adequately diversified. Most advisers will recommend you have more than 3 stocks. Stocks are very hard to predict. When you bought NT, you didn't expect it to drop 75%, but it did. You have to consider the possibility that two of your stocks could nosedive, just like NT did. Sometimes a stock will crash and never come back. I would recommend at least 10 stocks, in a variety of industries.

In addition, while many mutual funds charge too much, Vanguard.com has some low expense, no-load funds that don't charge much. You might consider putting half you money in a mutual fund for diversity, and half in stocks you like.

I also disagree with your statement "banks always make money." There have been many banks that have failed over the years. Savings and loan companies, which are similar to banks, had a very rough time a few years back, and many failed. Not that I expect TD.TO to fail, but you never know.

I wish you the best of luck.

Answer 2

I am in a simliar situation and I suggest that unless you are willing to spend 60 hrs a week doing this, then you let someone else handle it.

If not then I will share my strategy. I hold only 1 stock at a time. I don't not watch it for more than a few hours at a time at the worst. I tolerate nothing under 3% net negative. I sell at 20% gain regardless. I sell at 5% if I am uncertain. I hold a stock for perhaps a week. I have leapfrogged $80k this way. It is extremely risky and I spend perhaps 70+ hrs a week doing it. Criteria are very important. I am what you would call a day trader. My portfolio is up 62.3% YTD. I am sharing all this because I believe it is the only way to make large gains in the stock market. Making small gains should be nearly risk free and I see your 75% drop and hurt. Be cautious, seek professional advice for your money before it has dwindled and 2% no longer means $2,000. The stock market is mean, and it will eat your retirement without a flinch.

Answer 3

I think better advice is to sell half when you reach a 30% gain; and always use a trailing stop loss. However, it really depends on the market environment. The thing about fundamental analysis is that it won't tell you when to buy; it only tells you what. The fact is, there can be a discouragingly big difference between a good company (strong fundamentals) and a good stock (appreciating rapidly). No one has figured out the perfect system so far. An approach will work great for a while and then it won't, as the market environment changes. So hang in there.

Answer 4

It is my opinion that your proposed strategy threatens another NT disaster. Splitting 100k between only 3 companies is extremely risky. Much more risk than your retirement funds should be subject to. If you are adverse to mutual funds, you should invest in no fewer than 10 different companies and preferably as many as 20.

Your 3 stocks are good choices in general. Now come up with at least 7 more. Here are a couple of suggestions to consider.

CHL, SAY, MMM, JNJ, MET, CAJ, COP.

Notice that there are 3 foreign stocks. That will provide some geographic diversity.

Now you say you do not wish any mutual funds but there are certain funds that you really should consider. They will add diversity. Index funds are an inexpensive way to create that diversity. Consider a mutual fund that invests in small cap stocks to improve your overall asset allocation and also funds for geographic diversity. For example, swz, tdf, iif, chn.

Answer 5

I like your portfolio, expecially SLB. With oil becoming harder and harder to find, I believe the oil service companies will be the best place to invest, since more and more of their services will be needed. I have invested in MIND and BTJ, because I think 3d seismic mapping companies will also be important as oil companies seek to map out where oil fields are, especially offshore fields.

If you are looking for investment ideas, I think the best thing to do is see what the best traders are buying and selling. This is the idea behind the site http://www.top10traders.com - this is a free site that lets you create a portfolio of stocks with $100,000 in "play" money. Each day the site ranks the best performing portfolios, so you can see how your picks perform compared to other investors. You can also read posts on investing from the best traders, as well as share your own investing ideas.

Here are this month's best traders:

http://www.top10traders.com/Top10Standings.aspx

Good luck!

Answer 6

I would suggest PVX as an energy possibility. It pays a dividend every month and the % is not to shabby. The price goes up and down a few dollars but not to much. The constant monthly dividends, make for some great compounding. I'm not too hot on your Banking choices. Banks don't always make money. I"m not fond of banks in general. Just my 2 cents worth.

Answer 7

A much safer option for your pension is to use ETF's. This will keep you into the areas you think are going to do well, but reduce the single stock lack of diversity. For banks- IYG- financial services ETF. For oil/energy - XLE. Pick a few others that you think have long term potential, or just go with SPY or DIA to cover the more general market. The original idea of only 3 individual companies for your retirement pension is a very risky venture.

Answer 8

So you are talking $33k for TD (also on the NYSE), Toronto-Dominion Bank (nice performance numbers), with something around 560 or so shares; $33k for SLB, Schlumberger Ltd, with somewhere around 480-ish shares; and $33k for Swiss power and automation tech company ABB for a little over 2,000 shares. I generally trade for full blocks (100 shares) and don't know what your brokerage fees are (Scottrade's $7 is nice and you can do odd lots at no extra charge).

But you have an undisclosed (it is extra, isn't it?) amount of Nortel Networks. Funny, you bought it at almost the price I sold it ($8 something) a while back, so you didn't get my shares. I could have had it for about 50 cents but balked even though they had several billion in cash, so it could have been an even better profit for me, but I'm happy. Its a good company so it will rebound for sure.

At any rate, your choices probably won't embarrass you much. They aren't on my short list, but that doesn't mean much. Good luck.

Answer 9

I have a background in equity options, and not in equities themselves. Here are my thoughts.

You are 46, with 100K. You have 19 years until you're 65. I think you should have more than three positions, from a risk assessment point of view.

Regardless of your view on risk, you didn't talk about an exit strategy. It sounds like you have an entrance strategy (I don't know much about SLB et al) but your analysis is not 19-yr type of analysis, it seems more like 6, 12, or 18 month type of analysis. It seems like that type of entrance strategy should have an exit strategy to accompany it, and you have none.

Answer 10

Your portfolio is one of the worst I have ever seen in my entire life.

I am a Portfolio Manager with over a decade of experience (This means I have seen a lot of portfolios)

I am willing to help you for FREE because with those holdings you are not going to make enough money to survive another 40 years.

Top 5 Answerer.