Weighting

[Be Here Now]

(04-14-2014, 09:02 AM)hendi_alex Wrote: In my opinion, diversification is way over rated... I used to expend a good bit of effort in trying to balance the portfolio between domestic and foreign, large cap, mid cap, small cap, spread between at least 8-10 investment classes. After the experience of 2008 and 2009, that effort has been tossed out. Now just a mild diligence is maintained, such that single tickers and single sectors don't get way over sized...

Your entire comment expressed my views very well.

When all correlations except the long Treasury went to 1, that changed every attitude I had toward investing - stocks, real estate, everything (I had already realized that precious metals are a fool's game). The only thing left was to get on board with dividends, which I discovered in 2011 with Seeking Alpha and David Van Knapp.

Sidebar: I am retired and not in the accumulation phase. My comments are primarily directed toward those who are spending their dividends, although as a partial accumulator my thoughts might be of benefit for others.

I use a spreadsheet to track by stock type, and within type by individual stock, the following items (among others):

• portfolio percent invested based on original cost,
  
• target percent for the stock type,
  
• portfolio percent invested based on market value,
  
• current yield
  

For example, I have a stock type for upstream MLPs, another for midstream MLPs, yet another for mREITs, etc. I have guideline allocation percentages for each type, but reality invariably prevents me from hitting them. Further, I do not for the most part reinvest the highest yielders. Most of my reinvesting is into the lower yielders.

With the high yielders, I either spend the cash, or opportunistically invest in whatever I want to accumulate that Mr Market is offering at a bargain price.

I have tried to use fixed percentages, but Mr Market rarely offers what I want when I have investable cash. I must either accumulate cash or take what is on offer that I want regardless of what portfolio percentages might dictate.

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(05-01-2014, 07:04 PM)cannew Wrote: If you only wanted four, which would you choose?

My minimal list is informed by human needs that must be met, in the context of a global civilization with global investment opportunities:

• Food = GIS. To my mind, this is the single most important stock for any investor. GIS provides basic nutrition on a massive scale, and has done so for over a century. It has paid a dividend for 115 years, and it has never reduced its dividend in that time.
  
• Water = ???. I defer to CCC experts on this. I know there is at least one water company on the list, but I have never bothered to inform myself. Take your pick.
  
• Energy = KMR. For the USA investor, this is an income generator par excellence.
  
• Addiction = PM. If you think addiction is not a human need, look around.