In order to have a successful year, some possible risks should be taken into account. These risks include foreign countries such as North Korea, political cannibalism, Fed rate hikes, and the unknown. In order to best minimize risk, you must diversify your portfolio. Investing in quality companies, ETF’s, Cryptocurrencies, and speculative companies-all having different volatilities-is the perfect way to invest for 2018. Trends have shown that the market will continually grind higher. With that being said, it is my recommendation to have three main accounts to best manage your money.
The first account should be a boring account. This account will be home to different mutual funds, emerging markets, and ETF’s. This will allow you to have a wide range of exposure to the overall market. In the past 90 years, the average rate of return for the S&P 500 index has provided a return of around 9.8 percent. My recommendation would be to place 50 percent of your assets in this account. I wouldn’t monitor this account on a daily basis, as these investments shouldn’t be that volatile. This is the safest account you will have. But in some cases, boring is better.
The second account should be a short-term portfolio, mainly used for individual stocks. This account should implement: Buy the dip, Dog of the Dow, and Growth investing methods of investing. I would place 40 percent of your assets in this account. In order to best prepare for some of the risks that may be associated with this account, I recommend placing 70 percent in stocks and 30 percent in cash in this account. The main purpose of doing this is when there is a correction and you want to buy the stock, the funds to purchase these stocks will be readily available. You’ll end up liking correction days better than most if you implement this method. An example of a great diverse portfolio for 2017 would include companies such as Visa, Boeing, Nvidia, Caterpillar, and Salesforce. This type of set up gives you exposure to several different sectors that have immense potential to grow in the future.
The third account would be held in the cryptocurrency market. It is best to be exposed to as many Cryptocurrencies as possible, as we are still unaware as to which will become as big as Bitcoin. In addition, I recommend looking into, Litecoin, Ripple, Bitcoin, Bitcoin Cash, and Ethereum. Because of the extreme risk seen in the marketplace, I would only place 5-10 percent of your assets in this account. Every day you will hear people bashing Cryptocurrencies, and in turn, affect the price of the currencies. However, it is important to understand that this is a long-term account and there is the possibility of losing it all. In contrast to the negative comments, this account has the potential to quadruple your initial investment.
Profit Taking/Stop Loss
Now that you made the money from this playbook of investing, it is important to know when to take your profits, and when to stop your losses. I normally wait for the investment to fall 5-10 percent before selling. I wait to see this trend because you have the possibility of being correct about the stock you invested in, but are just too early. This is precisely why I would never recommend selling your stock on the slightest bit of negativity to the stock price. However, time is just as valuable as money, and if you keep that money in the name and it doesn’t seem to do anything, you have to be comfortable in taking a loss and reinvesting that money into a stock that is working. Now, for the winners, I would recommend waiting until the stock hits 50 percent above your initial investment to take 25 percent off. The goal is to be investing house money so you can become more exposed to the market and be able to branch out into different companies and mainly, make more money.