How to build a well balanced portfolio ?

Let's see what I have built. With your comments it would be great to improve our portfolio techniques!
We have seen in previous post, the importance of having a reserve of cash or bonds in your investment portfolio in order to better balance the risk of a stock market downturn and to have a lot of cash to put in the market and profite of the downturns.

I have decided to go on Reuters.com and open three different public portfolios, with three management techniques. These portfolios will be managed/balanced every three months but you will always be able to check their performances on Reuters.com

The first portfolio: MyIdealPortfolio is a balanced Bond/Stock portfolio with a recurring cash investment of 1.000 euros/month and an initial deposit of 100.000 euro. Mainly based on ETFs.
The initial composition has been made taking into account:
-my opinion that we are at the end of the bear market, that means that the bond/cash portfolio should be 30% maximum (I advice to read "The Intelligent Investor" by Graham for what concerns portfolio allocations: from 25/75 to 75/25 for the Bond/Stocks ratio according to the sentiments o the market and the exposure of the owner to the market risks).
- a leveraged ETF can increase our exposure to the potential high gains the markets will have at the beginning of the Bull market, this percentage will change over the years in favor of ETF on stock market or ETF on Bonds
- The choice of ETF is to better spread the risks over different stock
-10% put into one stock we consider unevaluated and with great potential. I think Ja Solar Holdings has a lot of potential (we will see in other post why).

The second portfolio is dedicated to value stocks with solid fundamentals financial ratios: theScreener. It is all stocks.

The third is trying to hunt the best "penny" stocks available on US markets. CheapStocksHunt. Low price with good fundamentals.

These two last portfolios have been created and their will be managed with the help of Google Stock Screener, which I suggest to all persons who desires to invest in US markets. Hoping that soon it will be available for other markets too.

During following months and, hopefully!!, years we will monitor their performances and we will see which are the best strategies for each type of investor.

Cash is King.

Making mistakes is part of life, it could be useful to make mistakes. Especially if they teach you how do better in future!
What was my main mistake last year?
Well I followed literally the "buy and hold forever" of Buffett's speeches, and I stayed in the market with my position, just changing a little bit some of the most aggressive to some less aggressive in order to fall down with a Beta not too far by 1. That means more or less as the main index. An higher beta of your portfolio means that you will move faster than your benchmark.
Keeping the positions was good choice because I strongly believe in my asset allocation and all the companies I suggested last year they are still wealthy and doing fine even after the crisis. None of them failed :-)
The problem is that at the end of the bear market cycle it will be great to have a lot of cash to put in stock investment because the recovery we will see in next years will be strong and will give us a lot of satisfactions. My only regret of this crisis is to NOT have a lot of cash in my portfolio to allocate in investment now, that they are trading at P/E so low and when you can see bargains all over!

So, please, learn by MY mistakes and NEVER stay without a good amount of cash :-) Cash is King, another Buffett’s quote.

"it's far better to buy a wonderful company at a fair price than a fair company at a wonderful price".

We have talked a lot about the companies' evaluation, but reading the old posts I have realized that a clear description of the stock evaluation process has never been given.

Instead of describing this process with my own words I want to share with you a very well described internet page where you can find some excellent explanations and useful tools (it is in my bookmarks list :-) )

Click here to discover the magic behind P/E.

Have a good read!

Happy New Year

After a long break, not a lot to say about a panic crisis selling period that still last and that probably will last for some more months.

We remember that historically there is a sort of strong correlation between economic crisis and market reactions and that normally, in the past, equity markets have started to clib and re gain part of the losses about six month before the "official" END of each economic crisis.

Most economists forecast an end of the economic crisis at the beginning of 2010, that would mean a possible begin of the recovery of the stock markets in mid/end 2009.

A lot of money have been lost during last year and half. Value portfolio is reflecting the stock market, and so, it has lost a lot of money too.

This does not mean that we are scared or fearful face to the market, because we know, we trust in the cycles of the hisory and we have hope in the future.

It is not false retoric, it is what we have learnt about LONG TERM investment and what Buffet has always tought to us.

Be Greedy when the others have fear, and stay away when the others are greedy.

Now, it is out of any doubt, the "others" have a lot of fear.

During this 2009 Value Finance portfolio will keep investing in the market, finding good horses that in the future will run again, stronger than before because they will have survived at one of the worst economic and financial crisis.

Let me finish this post, a post of Hope, with my best wishes for a quick recovery to one of the Genious of the last century. I will finish with his most known and famous quote:

"Stay Hungry, Stay Foolish"

Steve Jobs

I have a dream!

Obama has won.

First two days and Wall Street falls very deep.

But as said in last post, I strongly believe that Obama will be a good answer to this crisis, by a psicological point of view and also, I hope, with the new rules that he will give to Wall Street.

Personally, I would like to see Warren as next Treasury Secretary as someone has said in past months.

I don't think he will be, but it would be very positive to have a good Cop who checks the financial craziness going down in financial World !Image by capitancarlo

Obama Wins, We fly.

Today is the day. America votes. Finally We'll know the doom of the World.

Well yes it's just the election days in US, but if you were looking at TV of all around the World you'd have seen the level of interest and passion that this show....oups election has created all around the Globe. The Presidential campaign has cost about 2 bil dollars, a lot of money, but nothing compared to credit crunch, banks bailout, Wall Street crack etc etc.

Tonight US will have a new President.

From Japan to Africa, from Barcelona to Dubai it's Obama fever, it seems that the appeal of the democratic candidate has gone very deep in the hearts of people of whole World.

That's basically why all the investors are hoping in his victory.

Omama's victory will bring a great positive mood all over the world, the yes, we can will be spread in a generally "Think positive" that probably will let re start somehowe the confidence and, then, the economy. Of course Obama won't solve all the problems, but by certain, the positive and good mood will push people in looking forward with a better sight than in the past months of markets and economics crisis.

Let's say that the recession will probably last less with Obama than with McCain.

So, this evening, cross the fingers and watch CNN !

PS: if Obama will be the president, there will be a great new financial bubble to jump on and ride to make goods profics: Green Stocks! Solar, Wind, Water.... Think pink and go green!

Green post you have to read considering that now there are green stock trading with R I D I C U L U S low P/E ratio (about 5 / 6 /7 in front of annual growth of 40% of revenues in average!):

- German Sun for high returns

- Sunny Opportunity

- Renewable Energies