Friday, January 22, 2010

2010: US Global Stock Portfolio for Newbie.

The year 2009, would be one of the best years to start investing in the financial history. But we cannot go back in time, so its better we start now.

With 2010 just started, I do not expect the same spectacular returns this year. But it’s certainly a good time for Newbie to get their feet wet in the world of stock maket.

Here is a good strategy for building up a long term portfolio in US Stocks.

I have come up with 5 classifications (I will refer to as “Sectors”):
  1. US Technology:  Google,   Apple.
  2. US Banks:          Bank Of America,   Citi Bank
  3. China:               Baidu,   iShares FTSE/Xinhua China 25 Index ETF (NYSE:FXI)
  4. India:                The India Fund Inc (NYSE:IFN)
  5. Commodities:    iShares Silver Trust ETF (NYSE:SLV)
Total investment to be made in 2010: $40,000

Average: $10,000 per Quarter. ($2000 per sector per quarter)

Equal amount of money should be invested in each sector. That’s $2000 per quarter for each sector.

Assuming you are paying around $10 as brokerage. Buy $1000 worth of stock at a time. Do not buy less that $1000 because at $10 brokerage you are already paying 1% in brokerage.

Wait for a correction in the stock market within a same quarter. If another correction happens in the same quarter, buy the remaining $1000 worth of stock for that quarter in each sector.

The buy decision for a particular stock (not the whole portfolio) can be made anytime if your stock goes below 8% of your average price for that stock only.

One needs to stick to $2000 per sector, per quarter rule (15-20% plus or minus deviation is fine, try to adjust it next quarter).

1. One needs to diversify in all the sectors. Do not exclude any sector mentioned above.

2. If one is short on cash then one can start with $20000 per year. But I would recommend $40000. If you think its not worth it then you can always stop it in the next quarter.

3. Some sector have two choices: one can choose to invest in both or just choose any one.

4. This is a long term portfolio and should easy give you atleast 15% CAGR returns per year for the next 3-4 years. 

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