Putting together a diversified portfolio is critical to long-term retirement investing. Everyone knows this. But let’s face it: It takes a lot of time to research investments, and we all need a sanity check before we jump in with actual money.
CNBC”s Jim Cramer provides a bit of help for investors by offering up five investment flavors you should have in your portfolio: growth, high-yield, foreign stocks, a speculative stock and gold.
I certainly like his thinking — although it’s a bit narrow given some missing pieces, such as bonds — and I have some suggestions and advice for each of Cramer’s investment categories.
Of course, Cramer isn’t necessarily advocating his investment mix for retirement purposes, but I believe investment advice and action is always a part of retirement planning, so let’s go ahead and give this a whirl.
Cramer advocates looking for the rate of growth in this category, using Amazon (AMZN) and Netflix (NFLX) as the examples. And they’ve got growth in spades — NFLX has grown revenues 116% since 2009, while AMZN is up 150% in that period. But both are still working on solidifying and growing the bottom line of the equation. Growth is great, but profitability is even better.
I like Google (GOOG) as a growth stock; revenues have grown 114% and net income 65% over the same period. Google is in virtually every arena available — across mobile, cloud computing, devices, and of course search — and the company shows no sign of slowing down its reach and capabilities. Its size ($50 billion revenue in fiscal 2012) might cause concerns over future growth, but the market has a price-to-earnings ratio of 32 on the stock, so it believes there’s future growth available for investors. So do I.
Cramer wants you to own big high-yielding stocks, and so do I … with some caveats. Understand what “high-yield” means and what to avoid. Pitney Bowes (PBI) yields nearly 5% today; do you want to own it for the yield? Probably not. You can get that same 5% with AT&T (T) and Shell (RDS.A) with a lot less worry about future dividend growth, while an investment in Intel (INTC) will get you close to 4% yield, again with some future comfort.