Hey everyone,I just had a few questions about possibly adding some diversification to my portfolio. I am currently a 22 year old college senior studying finance. I started investing in January '11 in a Roth IRA account and have had help from my father with investing the yearly 5k in the account. It is about time I add more cash to the portfolio and was wondering what recommended strategies were to allocate the money.Currently I have a portfolio with 18 stocks in it. Over the past two years I have currently made a 29% return. Being that I am so young my strategy has been to invest in small cap companies and other high growth companies with the idea that I can recover much easier considering I started to invest at a young age. I have a few stocks that pay dividends and also have a few larger companies and more stable businesses in their so the portfolio is a bit less volatile.My question is this, I need suggestions on whether I should either a) put more cash into stocks I already own, b) invest in corporate bonds and place some of the money in a bit more of a stable area or c) buy a couple more companies and add a larger range of companies to the portfolio. Any investing advice is greatly appreciated and I need all the help I can get. Thanks!
Congratulations on getting an early start to your investing. I'm not an investment professional, just a MF member who does his own investing. I would not be interested in bonds in your situation (actually, I'm not interested in them in my situation either :) ). Interest rate risk is significant in my opinion. I also believe that by proper diversification and investing over time, you can manage your risk. You are not only diversifying over companies and industries, but also diversifying across time and market conditions.If you want to reduce your overall portfolio risk, I would add more stalwarts to your portfolio (e.g., WM, PG, PEP, BRK-B, etc.)Just my opinion, others will hopefully weigh in with their thoughts.Best of luckBH
I actually own a significant position in both BRK-B and PEP haha.
Congrats on your good taste. :)BH
The best allocation strategy is to allocate your money to whatever is cheapest! Asset class allocation is pretty arbitrary; it's usually best to just stick to buying undervalued issues, regardless of whether they're stocks or bonds.However, corporate bonds typically require at least a $10,000 investment. Seeing as you only add $5k to the account each year, I don't think buying bonds makes since at this point.
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