The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Small Cap Investing


Subject:  Re: Development Stage Company Valuation Date:  4/18/2006  9:39 AM
Author:  jimpiccard Number:  48 of 66

Like you I also bout TASR for around $7, and intend it as a long-term hold. The negative news just got overdone; and I personally think it was a great idea for them to start making known how TASRs are really getting used in the real-world almost weekly (if not more), ending situations a lot more favorably and with less risk than with a gun. Their 'just the facts' posting of such news, coupled with the favorable on-going lawsuit record, is helping the street see them in a more favorable light.

The one bug I'd like to put in your noggin' is: are such stocks that we normally play around with in our regular portfolio, appropriate for an IRA? It depends on where you are relative to your IRA, I guess. For me, in my early 50s, it's still a ways away. Still.......the one way I convince myself that it's ok for me to 'play' with my regular portfolio, is because I ensure that my retirement accounts are not at such relative risk. For me, 401-k type or IRA investments fit fit a couple of criteria:

#1: They have to be around. Even stocks I consider "stable', or unlikely to ever suffer a major adjustment downwards, are not ok for my IRA. I don't want to have to worry about what is in my IRA already== ever. (Well, not until closing in on withdrawing the funds, anyway).

#2: Diversification. And by diversification I mean accumulating a retirement portfolio over time that:
- is not concentrated in any one area; and I include S*P 500 tracking funds as 'just one area'. We've all seen that those can indeed go south, for years at a time. An S*P 500 index fund/etf should be one part...and only one part....of everyone's retirement portfolio.
- sector /industry diversification has to become greater inside your retirement portfolio, over time. After all: was anyone just ten years ago (or less) foreseeing the huge runups in commodities (e.g., copper, oil, natural gas); or in, of all things, ethanol? Or cement and concrete? The steel ups and downs?
- international diversification. This is more important now, than it was ten years ago; and will be more important ten years from now, than it is now. Compared to the rest of the world, the US economy will be 'smaller' ten years from now; more and more dynamic companies that are The Real Players will not even be in the US significantly; and the US is building in some economic 'disaster' scenarios with our huge double deficits. The dollar ain't gonna be what it used to be, either.
I think history will end up record something like: "The US dollar continued as the 'currency of choice' in the world far longer than the weakening fundamentals of the United States justified. But after having been the stalwart for so long, it had it's own 'quality momentum'. However, when this in-supportable 'dollar bubble' finally burst in 2012 (or whatever!!), it did so with a vengeance; and the US currency was never the same again, once having been knocked so solidly off its perch.....".

So, what do I personally think should be in IRAs/401ks?

1. NOT most stocks; and certainly not those that have a very legitimate real risk attached to them.
For me, an acceptable stock is something like BP. Very well run company; not amoral, as the management of the US companies tend to be; a leader early on in various alternative energies; diversified operations; etc etc. I also think oil and gas trends will continue generally up in this century, not generally down.
One must be careful even with such picks, of course. Some Americans a few years ago might have considered GM a 'stable' company in which to invest--if they weren't paying attention. And as much as I'm pro-TASR, it doesn't meet the criteria, either; not for an IRA.

2. Any IRA investment should be one that maximizes the tax-deferral benefit. So, in th