While the current market downturn may be offering a chance to grab some shares of your favorite company, it may also be a chance to declutter your portfolio a bit.
It pays to be picky – especially when it comes to your investments.
Marie Kondo, the “decluttering” guru, made millions of dollars by devising and popularizing a common-sense method for purging a home of unnecessary and unwanted “stuff.”
Her philosophy is simple: Items that spark joy should remain; those that don’t should go away. And this method isn’t just limited to the dusty, unread books in your collection or the waffle maker you haven’t used since you got married …
Investors can also adopt some of Kondo’s cleanup tactics.
Even some of the most seasoned and savvy investors fail to tidy up their portfolios as they should. That’s because tidying up a portfolio requires an explicit commitment to do so… along with a dispassionate analysis that asks a version of the question, “Does this item spark joy?”
Not every worthwhile investment will “spark joy,” of course, but it should spark some sort of powerful and obvious positive reaction.
Remember, your goal is to identify the items you wish to keep, not the ones you wish to discard. The discard pile is simply the by-product of what you wish to keep.
And those looking for fresh opportunities to add revenue to their portfolio will want to read on to learn where I’ve found the next megatrend. The locale might surprise you… but even more surprising is the potential to profit.
Spark “Yes!”
If you examine each stock in your portfolio and ask yourself honestly, “Will this stock build wealth?” or “Will this stock be a 10-bagger?”, the answer should always be a resounding, “Yes!”
But if the answer is “No,” the stock doesn’t belong in your portfolio, even if it’s a solid blue chip or a popular household name.
Those sorts of investments may be fine. But very few investors set their sights on just “fine,” because in the investment world, “fine” is synonymous with “opportunity cost.”
That’s certainly not fine in my book.
“Opportunity cost” is a term of regret that ruefully refers back to “what could have been;” it describes the consequences of making a misguided or suboptimal choice between competing possibilities.
Analyzing opportunity cost can and should be part of an investment discipline that insists on buying extraordinary investments, rather than ordinary or “fine” ones.
Based on decades of stock market history, we know a few key details about what produces investment success over time. For example, we know that…
- Fast-growing companies tend to produce better investment results than slow-growing ones…
- Cash-rich companies tend to produce better investment results than heavily indebted ones…
- And companies that possess a formidable “moat,” as Warren Buffett calls it, tend to produce better investment results than companies without any special competitive advantage.
So, when we examine the stocks in our portfolios, we should favor those that possess one or more of these winning traits.
You don’t want to pursue investment success by betting on flukes. Instead, you want to stack the odds in your favor as much as possible.
And I’ve discovered a way to do that…
Buy Recession-Proof Stage 2 Stocks
Have you ever heard of stage two stocks? According to Luke Lango they’re the holy grail of investing because they could return as much as 500% in only 21 days and pay you an extra $10,000 or more in recession proof cash every month. Here’s how.
The “Portfolio Purge” Formula
Calculate the size of a company’s net debt, and then divide that figure by the company’s annual revenue… to produce a simple ratio: [Net Debt Divided by Trailing 12-Month Revenues]
Generally speaking, the higher the ratio, the worse a stock is likely to perform over the following five years. The lower the ratio, the better a stock is likely to perform over the following five years.
That’s it. That’s the entire process.
I routinely use this simple test to identify potential investments. (Obviously, my research does not end there.) But once I identify a potential investment, I qualify that stock by conducting additional targeted qualitative and quantitative research.
That’s what a portfolio purge is all about – avoiding underperformers so that you can make room for outperformers. That’s a process that can spark a lot of joy.
A Powerful Megatrend Poised to Spark Joy
I’m giving my readers the chance to play an emerging phenomenon – with the potential to mint millionaires. In addition to naming my No. 1 way to play this megatrend, I’ll also show you five ways you could multiply your initial stake 10 times over… and zero in on the surprising area of the U.S. where all of the action is.
Keep an eye on your inbox for a special announcement and be one of the first investors to participate in this flagship event.
The next investing opportunity is on the horizon… and it’s sure to spark joy.
Regards,
Eric
P.S. What is Louis Navellier’s BIG ENERGY BET?
Legendary investor Louis Navellier says that if he had to put every penny of his life savings into one sector of the markets… this would be it. Find out what it is here.
