Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.


How To Collect Your Share of My Million Dollar Giveaway

How To Collect Your Share of My Million Dollar GiveawayWe recently kicked off the most outrageous initiative in the history of investment research. It’s called the Income Millionaire Project. And the goal is simple: create 1,000 income millionaires. That’s a $1 billion goal! No one has ever tried it before, but that doesn’t bother me. I’m so sure you can use this program to make a million bucks… I’ll pay you $1,000 to start your journey. Go here for details.


Hit the Bullseye of Your Portfolio

By Jim Pearce on April 28, 2017

As any personal trainer will tell you, the key to staying in shape is keeping your core muscles strong so that you can build on that foundation. That’s also good investment advice because having too much money in weak, flabby assets often leads to bigger losses than you expect in a stock market correction.

That’s why this issue of Personal Finance includes several articles about investments that make excellent core holdings and how they can help your portfolio stand up under pressure. The stock market has been on a nice run lately, and we hope it continues. But it wouldn’t take much to send stocks reeling, so now is the time to take inventory of what you own and identify a group of core holdings that can serve as the portfolio’s backbone.

Core holdings can be stocks, bonds, mutual funds and exchange-traded funds. But to qualify as a core holding, an investment must meet two requirements. First, it should be consistent with your performance goals. Second, it should limit your risk to an acceptable level. That description is intentionally broad because every investor defines performance goals and acceptable risk differently.

Begin at the Center

Then build your portfolio around core holdings. Think of your portfolio as a series of concentric rings, like the ones on a dartboard. Except unlike a dartboard, the biggest ring is in the center, with the circles becoming narrower the further you get from the bull’s-eye. The idea is to put most of your money in the bull’s-eye and less in the outer rings.

The bull’s-eye consists of an investment that closely matches the rate of return you expect long term. For example, an investor wanting to match the overall return of the stock market might select an S&P 500 exchange-traded fund as a core holding for the bull’s-eye, while a more conservative investor might choose a bond ETF instead.

Whatever the core investment happens to be, it must have a high probability of behaving exactly as you’d expect given certain market conditions. If the stock market doubles over the next five years, so should the investment you selected to mimic that performance. If the market crashes and drops in half, you also must be willing to accept similar losses from that holding.

Expand Outward

Not all core holdings belong in the center ring. In fact, you can define your portfolio further by surrounding the holdings in the center with investments that may be vastly different. For instance, an aggressive growth investor might add a tech sector ETF (or a group of tech stocks) in the next ring to supplement the core S&P 500 index fund holding and juice up the portfolio’s total return.

A more conservative growth investor, however, might use the same S&P 500 index fund as the core but add a defense sector ETF (like the one described on the facing page) to emphasize income and share price stability. An income investor, on the other hand, might start out with a diversified bond fund as the core but use the same defense sector ETF in the second ring to emphasize growth and provide a hedge against inflation.

The third ring should fine-tune your portfolio by accounting for any risks you want to address. If a spike in gold prices might ruin the performance of your other core holdings, then counterbalance that effect by adding a gold fund. If you’re already betting on higher inflation by holding several commodity funds in the core, a bond fund that offers protection from an unexpected drop in interest rates might be better in the outer ring.

Size Up Your Rings

How much money you should put in each ring depends on your financial situation. A retiree living on a fixed monthly pension might have a wide second ring that emphasizes growth and protects against the possibility of inflation whittling away the core’s purchasing power. But a retiree already withdrawing from an IRA may want a big center circle, with more income-producing investments as the core.

Over time, most investors inadvertently end up with a mixed bag of investments that bear little resemblance to their performance goals. If this happens and you’re not sure how to fIx it, ask a financial planner to evaluate your portfolio and help you rebuild its core holdings.

Jim Pearce is chief investment strategist for Personal Finance.

You might also enjoy…


R.I.P Bull Market—Here’s How To Protect Your Wealth

I hope you’ve enjoyed the phenomenal bull market of the past eight years…

Because it’s about to come to a screeching halt.

The Federal Reserve’s nearly decade-long spending spree has finally come to an end.

With no other options left at their disposal, the Fed has no other choice than to raise interest rates to keep inflation in check.

And that leaves you with two options…

Do nothing and suffer the agony of watching the profits you’ve accumulated over the years evaporate right before your eyes…

Or reposition your portfolio and invest in companies which prosper as inflation rises and interest rates soar.

I think the choice is clear. And I’ll show you the best new positions you can take if you click here.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.