Balancing Your Portfolio – LIVE from Sundance Resort

By February 13, 2018Blog, Media, Videos

Hi, this is Scott Carter, and I’m in Sundance, in Utah. I don’t know if you’ve ever been to Sundance in Utah, it’s a great ski resort. Of course, they have the Sundance Film Festival here every year, where the independent films come. And just as I’m walking here, I wanted to put together a little financial video. Jill’s got me up here hiking, and I said I needed to put this video together so I could take a little break, so that’s what I’m doing. It’s our secret.

Anyhow, I wanted to talk to you about the markets and investing. ‘Cause there’s no question about it, it’s been a volatile market these last few days. Certainly this last week, where you see the market going up 1,000, and then down 1,000, and you never know exactly what’s driving the market. And it reminds me that we’ve got to balance our portfolio. What do I mean by that? Well, you just can’t set it and forget it. You’ve got to own stocks. And as you own stocks, though, as they perform, you’ve got to either trim them back or add to the position, depending on your philosophy of how you want to invest.

And a good example of that … And people don’t like to rebalance though, they think it’s very complicated, but it’s not. And I’ll give you a good example. Last year, in 2017, there were five stocks that drove 40% of the gain on the S&P 500. You know them, they’re called the FANG stocks. The FANG stocks are Facebook, Amazon, Apple, Netflix, Google. They drove 40% of the total S&P 500. So, that gives you an idea of how the other 495 stocks performed.

But, if I was an owner of these stocks at the beginning of 2017, and then didn’t change my portfolio at the end of 2017, they’re gonna represent a significantly bigger portion of my portfolio than they did in the first part of the year. And, you don’t have to subscribe to my philosophy, but what I try to do is never have more than five percent of my net worth in any one company. Or 10% in any one industry. And what I mean by industry is like tech stocks, versus financial, versus manufacturing.

And so, as we look at this, and we rebalance our portfolio, if some have gained a lot, then you want to trim those back and either get in a cash position or invest it on something else. You also might want to then add to your position to other stocks that might be performing not as well, but still good, strong stocks. And then, there are some recession-proof stocks that you might want to have, because it looks like we are heading into … maybe not a recession, but a bear market and volatility.

What do I mean by recession-proof stocks? Well, stocks that may not necessarily be high-growth stocks, but they perform well whether the economy is strong or whether it’s weak. Utility companies. We have electricity coming into our houses, that’s not going to change whether we’ve got a strong economy or a weak economy. We buy food. We buy break, we buy milk. These are staples that doesn’t matter whether the economy’s weak or strong. And, that might be important when you’re looking at the economy, you might want to have things that are higher-dividend yields, but don’t necessarily get impacted as much as other companies do when we’re into a slow-growth market.

Warren Buffet had a great line in referencing recession-proof stocks. And he’s essentially America’s greatest capitalist. And he was a big owner of Gillette before P&G bought, though I think he owned 10% of Gillette. And he said, “I go to bed happy every night knowing that a billion men have hair growing on their face, and women have hair growing on their legs.” He said, “It’s much better than counting sheep.” Now, isn’t that a quote of a true capitalist? Just take a look at how beautiful Sundance is. If you’ve never been out here, I’d strongly put it on your bucket list. It’s a great place to visit, and it’s a great place to ski. Well, I hope this little investment tip helps. Have a great day.

Hi, this is Scott Carter, and I’m in Sundance, in Utah. I don’t know if you’ve ever been to Sundance in Utah, it’s a great ski resort. Of course, they have the Sundance Film Festival here every year, where the independent films come. And just as I’m walking here, I wanted to put together a little financial video. Jill’s got me up here hiking, and I said I needed to put this video together so I could take a little break, so that’s what I’m doing. It’s our secret.

Anyhow, I wanted to talk to you about the markets and investing. ‘Cause there’s no question about it, it’s been a volatile market these last few days. Certainly this last week, where you see the market going up 1,000, and then down 1,000, and you never know exactly what’s driving the market. And it reminds me that we’ve got to balance our portfolio. What do I mean by that? Well, you just can’t set it and forget it. You’ve got to own stocks. And as you own stocks, though, as they perform, you’ve got to either trim them back or add to the position, depending on your philosophy of how you want to invest.

And a good example of that … And people don’t like to re-balance though, they think it’s very complicated, but it’s not. And I’ll give you a good example. Last year, in 2017, there were five stocks that drove 40% of the gain on the S&P 500. You know them, they’re called the FANG stocks. The FANG stocks are Facebook, Amazon, Apple, Netflix, Google. They drove 40% of the total S&P 500. So, that gives you an idea of how the other 495 stocks performed.

But, if I was an owner of these stocks at the beginning of 2017, and then didn’t change my portfolio at the end of 2017, they’re gonna represent a significantly bigger portion of my portfolio than they did in the first part of the year. And, you don’t have to subscribe to my philosophy, but what I try to do is never have more than five percent of my net worth in any one company. Or 10% in any one industry. And what I mean by industry is like tech stocks, versus financial, versus manufacturing.

And so, as we look at this, and we re-balance our portfolio, if some have gained a lot, then you want to trim those back and either get in a cash position or invest it on something else. You also might want to then add to your position to other stocks that might be performing not as well, but still good, strong stocks. And then, there are some recession-proof stocks that you might want to have, because it looks like we are heading into … maybe not a recession, but a bear market and volatility.

What do I mean by recession-proof stocks? Well, stocks that may not necessarily be high-growth stocks, but they perform well whether the economy is strong or whether it’s weak. Utility companies. We have electricity coming into our houses, that’s not going to change whether we’ve got a strong economy or a weak economy. We buy food. We buy break, we buy milk. These are staples that doesn’t matter whether the economy’s weak or strong. And, that might be important when you’re looking at the economy, you might want to have things that are higher-dividend yields, but don’t necessarily get impacted as much as other companies do when we’re into a slow-growth market.

Warren Buffet had a great line in referencing recession-proof stocks. And he’s essentially America’s greatest capitalist. And he was a big owner of Gillette before P&G bought, though I think he owned 10% of Gillette. And he said, “I got to bed happy every night knowing that a billion men have hair growing on their face, and women have hair growing on their legs.” He said, “It’s much better than counting sheep.” Now, isn’t that a quote of a true capitalist? Just take a look at how beautiful Sundance is. If you’ve never been out here, I’d strongly put it on your bucket list. It’s a great place to visit, and it’s a great place to ski. Well, I hope this little investment tip helps. Have a great day.

 

Scott Carter

Author Scott Carter

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