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Author: MattMiler Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 6729  
Subject: Re: aggressive advise sought Date: 4/30/2000 4:41 PM
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bkgiroux-
We have similar portfolio goals and time horizons, so I thought I'd throw out a recommendation. Keep in mind that this is a subjective opinion.
SWEGX is an index of indexes. It represents the entire equity market, not just a subsection by capitalization or exchange. I consider a index of that nature to be VERY low risk over a long period of time. SWEGX also provides your portfolio with a great deal of diversification, lowering your downside risk.
For your current situation, I would recommend the following:
1) Continue monthly contributions to SWEGX for tax year 2000. Your should have a $4,000 balance in this index by year end.
2) Set a goal to write a lump-sum check for your 2001 IRA contribution on January 1, 2001. Make the $2,000 deposit and purchase a stock of your choosing with the funds (more on stock selection below).
3) Open a taxable Schwab account immediately with the $5,000 you have saved and purchase two stocks with the funds. I recommend a high growth, high risk stock with $2,000 of the funds and a bellweather stock with the other $3,000.

Your goal should be to hold your most aggressive stocks in your Roth IRA and your "safety nets" in your taxable account. In the future (2002 - retirement), focus on purchasing very aggressive stocks in the Roth IRA. Make monthly contributions to your taxable account and purchase either an index or shares of a "safer" stock when your cash exceeds $2000. The reason for seeking returns in the Roth is due to the tax advantages of paying no capital gains. Stay diverse, but also look for aggressive, growing companies.

Stock Selection:
I personally look for two kinds of companies in my portfolio:
a) High Growth, High Risk companies
b) "Technology Bellweathers"

I'd rather not recommend specific high-risk stocks, but your research should allow your to identify potential winners. For references sake, I hold RMBS, EXAR, TLCM and CYMI in this category. Stable, high-growth companies can be easier to identify. These are the companies like SUNW, DELL, GE, TYC, ORCL ect... that get talked about every day on CNBC. You probably won't get a 100% annual return on any of these (although SUNW has returned 120% since last July) but you are likely to find 12 - 15% annual returns on most of these stocks, very solid for long-term holdings.

As for brokerage choices, I also use Schwab. $30 per trade isn't a lot if you only make three or four trades a year. Service is excellent. Web site is great.

Best of luck,

Matt
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