The Dow and the S&P 500 have each pulled back about 1% today, and the market dip has got the financial pundits in a tizzy.
So to help calm your nerves I want to share two secrets behind our outperformance over the last many years despite the often-volatile markets. Let’s take a look.
First, we are always diversified and we only own stocks with strong fundamentals that work together in a portfolio. For example, take my Emerging Growth service.
Since our January monthly issue, our current Emerging Growth Buy List has gained 4.4%. That’s compared to the Dow’s 1.7% decline and a 0.2% dip in the S&P 500. This is what your performance would be if you purchased our entire Buy List three weeks ago.
Naturally, we’re going to have some stocks that outperform the rest of our Buy List, and by owning more of our recommended stocks, you spread out your risk. So if you owned just five of our Emerging Growth stocks, you could potentially be up 22.2% if you chose our five best performers… or down 13.0% if you chose our five worst-performing stocks!
But if you were following our rules and you owned more positions, say 25 stocks in a 60/30/10 allocation, you drop your worst-case scenario to a 0.1% gain—vs. the Dow’s 1.7% drop in the same timeframe—and your best-case scenario is still up a stunning 8.7% in three weeks.
You want to be in that sweet spot in the middle, where you maximize your potential gains and minimize your losses, and the best way to do so is to hold at least 15 to 25 stocks that work together in a balanced portfolio.
We do that for you in our Blue Chip Growth and Emerging Growth services, and we also recommend when to "trim" your profits—the second secret to our smooth and steady gains.
When you have a position that runs way up in a short amount of time, take some profits off the top. And of course, as always, I recommend holding 60% conservative stocks, 30% moderately aggressive stocks and 10% aggressive stocks.
There you have it. Two of our secrets to our stunning outperformance.
It sounds simple enough in practice, but I can’t tell you how often I have folks asking me why their gains don’t match mine—and the answer is almost always because they’ve cherry-picked their way into just a handful of stocks and aren’t sleeping well at night due to volatility.
So please keep in mind the importance of diversification if you’re looking to outperform the market, particularly in times of volatility.