3 Fool-Proof Ways to Build a Strong Portfolio

Traditional ways of saving won't cut it in this volatile economy

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As we learned from the financial crisis, we’re living in a global economy. The best investments are no longer always in the United States. So stepping outside that box is necessary to capture your desired returns.

With that in mind, let’s determine how much of your portfolio each element within it should account for, and study how you can position your holdings to capitalize on this forward-looking strategy.

Base Builders: Providing Stability and Balance Through Any Market

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Base Builders are generally dividend and income investments and should account for as much as 50% of your holdings. This is the part of your portfolio that provides stability and balance through all market conditions. Among the holdings in this part of your portfolio will be investments that many folks view as “boring.”

By adopting such a view, however, those investors miss two very key points. First, many of the investments in this category protect you in bearish markets and can soar 20% or more in good markets. Secondly, many of these will pay dividends — a much bigger deal than most investors realize.

If you go back more than 100 years — all the way back to 1871, in fact — you might be surprised to discover that 97% of total stock market returns were due to dividends. So it makes sense that the base of your pyramid — the foundation of your portfolio — would be made up of dividend-paying stocks and other income-producing investments.

Global Growth: Generating Returns from Around the Globe

Global Growth should account for as much as 40% of your holdings. These investments occupy the central portion of your portfolio, and include “Glocal” stocks (large U.S. companies with global operations), as well as investments in the hyper-bullish energy and commodities sectors.

Those global giants give investors a piece of the bigger returns being generated by such economies as China, India and Latin America, while still benefiting from the safer U.S. reporting and regulatory environment.

Rocket Riders: Rocket Fuel for Your Portfolio

The Rocket Riders are hyper-growth investments that should occupy up to 10% of your holdings. Over the long haul, these investments will generate massive profits, but in the interim you can expect them to take you on one hell of a ride.

Ultra-high-growth investments include direct emerging-market investments, newly public shares, alluring-but-risky turnaround plays and other such opportunities that are usually accompanied by equal helpings of volatility and risk.

By combining the profit potential of these mega-growth “Rocket-Rider” investments with the balance of the “Global-Growth” holdings and the high payouts of the “Base-Builder” plays, you’ll always be ahead of the curve as new investment trends develop.

Over time, you’ll find this investment pyramid to be an easy-to-use, highly profitable tool.


Article printed from InvestorPlace Media, http://investorplace.com/2012/07/3-foolproof-ways-to-build-a-strong-portfolio-july/.

©2014 InvestorPlace Media, LLC

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