If you find the right up and coming stocks, they may fit into your portfolio perfectly
The best up and coming stocks to hold in your portfolio all have one thing in common: They give you reason to believe they might be worth holding onto indefinitely.
Most successful investors know better than to invest any money in stereotypical “hot growth stocks”, those gotta-act-quick buy recommendations that come from a friend (or a friend of a friend), or an unknown source on the Internet.
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Best up and coming stocks for your portfolio
Most of these stocks have an established business and a history of sales gains, plus some earnings or cash flow, if not dividends. To put it more simply: these stocks have a clear business plan that seems to be working.
Of course, stocks like these will still suffer in a deep market downturn, like the one we went through in 2008/2009. They may also suffer in the shallower, shorter downturns that come along more often. But most recover quickly when the market revives, as it always does. In fact, stocks like these may lead the inevitable market recovery.
These are the kind of stocks we put in our clients’ portfolios. Though we think they are worth holding on to indefinitely, we keep an open mind. After all, they are subject to the usual risks. Competitors can overtake them. Expected contracts can fall through. They can lose key employees, run into union or regulatory problems, and so on.
Of course, nobody can predict the future. We’ll change our view and sell some as time passes. We’ll give up on some way too early, and hang on to others way too long. But if you focus on stocks like these, you improve your odds. The best of the bunch will offset your losses and leave you with highly satisfactory long-term returns.
Up and coming stocks for retirement: Stick with conservative estimates to account for unforeseen setbacks
As for the return you expect from investing for retirement, it’s best to aim low. If you invest in bonds, assume you will earn the current yield; don’t assume you can make money trading in bonds.
Over long periods, the total return on a well-diversified portfolio of high-quality stocks runs to as much as 10%, or around 7.5% after inflation. Aim lower, though, in your retirement planning—5% a year, say — to allow for unforeseeable problems and setbacks.
Above all, it’s important to remember that while finances are important, the happiest retirees are those who stay busy. You can do that with travel, golf or sailing. But volunteering, or working part-time at something you enjoy, can work just as well.
One thing we encourage all investors to do is perform a detailed study of how you spend your money now. Then, you analyze your findings to see what personal expenses you can cut or eliminate. This too can have fringe benefits, especially if it helps you break unhealthy habits. You may be surprised at how much you’re spending and how much more you could be saving for retirement.
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Make up and coming stocks 5% of your portfolio at the most
Do examine things carefully, but don’t expect perfection. If one of these growth stocks seems to check out reasonably well, you may want to take a chance and add the stock to your portfolio. Ordinarily, we’d limit any one initial purchase to 5% or less.
Even if you go beyond our 5% limit, it’s still a good idea to keep your portfolio well-diversified across most if not all of the five main economic sectors, despite any oversize holding in any one stock or sector. That’s especially so if the growth stock is in either of the two most volatile sectors, Manufacturing & Industry or Resources & Commodities.
After that, you need to monitor the stock much more closely than your other holdings, because of the more speculative nature of your investment. You’ll need to make a lot of difficult sell-or-hold decisions as the stock’s fortunes wax and wane. If it rises faster than your other holdings, you’ll need to decide if you’ll sell some from time to time or if you’ll let it represent an ever-growing portion of your portfolio.
What up and coming stocks do you recommend? Share your thoughts with us in the comments.
The post How to find and invest in up and coming stocks for a safer retirement appeared first on TSI Wealth Network.