If you’re a subscriber to any of my premium newsletters or to my Market 360 free e-letter, you know that there’s a lot uncertainty about what’s in store for 2017. What’s the best way to hedge our bets in case there are any near-term pullbacks? I’ll give you an insider tip that I usually reserve for my Blue Chip Growth and Emerging Growth readers. It’s called my 60% / 30% / 10% rule.
Step One: Achieve the Ideal Portfolio Mix
When you plug a stock into my Portfolio Grader stock screening tool, you’ll notice that the company will fall into one of three distinct risk categories: Conservative, Moderately Aggressive and Aggressive. I recommend that you to allocate 60% of your portfolio to Conservative stocks, 30% to Moderately Aggressive stocks and 10% to Aggressive stocks.
When you do this, you give your portfolio the perfect mix of stocks that will protect and grow your wealth while giving you exposure to the kind of homerun stocks that will jolt your returns.
Step Two: Watch Your Weightings
The other part of limiting your risk and maximizing your profits is “equally weighting” your stocks. Many investors fall into the trap of having too much exposure to one stock. When you have a big winner, it can easily dominate your holdings. While I fully believe in letting your winners run, you have to do it safely. A good rule of thumb is to never let a single company represent more than 10% of your portfolio.
Your stock positions should change as the stocks move up and down. So if there are stocks that have outrun others, I will recommend that you trim those holdings so that you not only lock-in profits, but keep your portfolio in the ideal balance. With the market breaking through new highs, now would be an excellent time to trim your big winners that have exceeded 10% of your portfolio.
Step Three: Maintain Your A-Game
In addition to monitoring any big moves in your stocks, I suggest you periodically run your portfolio through Portfolio Grader and take note of each stock’s letter grade. Portfolio Grader is powered by a proven formula that measures each company’s fundamental health and potential upside.
I refresh the data each week, so it’s important that you check your stocks often to make sure your portfolio is full of As (Strong Buys) and Bs (Buys). Watch any stocks that fall to a C-rating (hold), and sell the stocks that slip to a D (Sell) or F (Strong Sell). As you can see from the chart here, A-rated stocks have a track record of trouncing all others.
As a general reminder, the A-rated stocks in Portfolio Grader are backed by my proprietary formula, but they are not always the best of the best. I reserve the top recommendations for my advisory newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Platinum Growth Club and the Navellier Family Trust. If you’re interested in truly refreshing your investing approach, these services would be your best bet.
To sum it up, if you are properly diversified and trim your winners each month, you can successfully sail through 2017, no matter what the next year brings.