5 Investment Pillars of a Retirement Portfolio

by Marc Bastow | August 8, 2013 9:08 am

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[1] 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.

Growth Stocks

Cramer advocates looking for the rate of growth in this category, using Amazon (AMZN[2]) and Netflix (NFLX[3]) 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[4]) 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.

High-Yield Stocks

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[5]) 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[6]) and Shell (RDS.A[7]) with a lot less worry about future dividend growth, while an investment in Intel (INTC[8]) will get you close to 4% yield, again with some future comfort.

Foreign Stocks

It’s a global economy, and Cramer wants you to keep it simple with investments in China- or Japan-based companies or ETFs. I would prefer to own a stock rather than a country, one with which I have some familiarity.

Jeff Reeves recently called out an opportunity to invest in Europe[9], citing Germany’s Daimler (DDAIF[10]) as one company seeing growth. Daimler’s a nice place to start: It has a 4% dividend yield, and at a P/E of just over 8x, you certainly won’t feel as if you’ve overpaid. As for familiarity, you can’t watch any sporting event without seeing their commercials.

If you want to own a country instead, Alyssa Oursler points out in “The 5 Best ETFs in the World[11]” four countries with soaring opportunities (the fifth is the good ol’ U.S. of A.).

Speculative Stocks

Again, another category that I like with a caveat — understand your time horizon. You certainly don’t want to tie up money with a long-term play if you need it in a shorter time span. There’s no time limit on the speculation, just on your need for the money.

Some long-term suggestions?

Well earlier this year I put money to work[12] at a rebounding Yahoo (YHOO[13]), looking for a turnaround that is still in the making; I have a target price[14] as opposed to date at which to sell, so I keep a close watch on its movement.

How about electric-car maker Tesla (TSLA[15])? It’s shot up over 300% year-to-date so you might be concerned, but a play on this name is all about the future of alternative vehicles in the U.S. — a potential long-term bonanza.


Gold is generally viewed as the long-term hedge against … well, just about everything. But the precious metal has not had a good time of it lately. The SPDR Gold Trust (GLD[16]) is down 20% over the past year, and the gold miners themselves (as proxied by the Market Vectors Gold Miners ETF (GDX[17])) is faring even worse, down over 40% in the last year.

Truthfully? Unless you have some money to put into metals for a very long time, it’s an area I find a little disquieting … and will avoid.

So there we have it. I like four out of the five categories in which Cramer suggests investment. I’m with him on the need for diversification across asset classes, and I like where he’s going with stocks — four out of five categories — as the lead dog.  My advice: Use the guide as a template, dig into some of your favorite ideas, and start building that portfolio.

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing he is long YHOO.

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  1. five investment flavors: http://finance.yahoo.com/news/cramer-5-things-own-now-120713560.html
  2. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  3. NFLX: http://studio-5.financialcontent.com/investplace/quote?Symbol=NFLX
  4. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  5. PBI: http://studio-5.financialcontent.com/investplace/quote?Symbol=PBI
  6. T: http://studio-5.financialcontent.com/investplace/quote?Symbol=T
  7. RDS.A: http://studio-5.financialcontent.com/investplace/quote?Symbol=RDS.A
  8. INTC: http://studio-5.financialcontent.com/investplace/quote?Symbol=INTC
  9. an opportunity to invest in Europe: http://www.marketwatch.com/story/the-case-to-go-long-europe-2013-08-05?link=mw_story_kiosk
  10. DDAIF: http://studio-5.financialcontent.com/investplace/quote?Symbol=DDAIF
  11. The 5 Best ETFs in the World: http://investorplace.com/2013/08/5-best-etfs-in-the-world/
  12. I put money to work: http://investorplace.com/2013/01/5-reasons-why-i-just-bought-yahoo-yhoo-msft-aol-amzn-goog/
  13. YHOO: http://studio-5.financialcontent.com/investplace/quote?Symbol=YHOO
  14. target price: http://investorplace.com/2013/05/yahoos-fire-will-stay-lit-the-ifs-ands-buts/
  15. TSLA: http://studio-5.financialcontent.com/investplace/quote?Symbol=TSLA
  16. GLD: http://studio-5.financialcontent.com/investplace/quote?Symbol=GLD
  17. GDX: http://studio-5.financialcontent.com/investplace/quote?Symbol=GDX
  18. InvestorPlace Retirement Insights: https://order.investorplace.com/index.jsp?sid=CN8104&uid=

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