It’s still a bull market, so own stocks
But not just any stocks — be sure to buy into large, high-quality companies
November’s end is nigh and December begins. Oh, the fun. This weekend brings us National Pie Day, National Fritters Day and Mutt Day. Next week? National Sock Day and Dice Day.
And don’t forget Friday’s Ultimate Fighting Championship in Las Vegas. To celebrate, don’t roll the dice gambling on sports or fritter away your fortune on some mutt of an investment. It’s a bull market. Own stocks, and stick to quality and purebreds.
Last week’s Money section of USA TODAY featured an article about three bearish pundits who were also bearish before the last bear market. Fair enough. But also fair is this question: Have they been bullish through this and prior bull markets? If not, their advice can’t help you really win in the long term.
While those ultimate fighters duke it out in Vegas, another fight pits bulls against bears. And because stocks rise more of the time than they fall, to win you must be more bullish than bearish most of the time. Some call me a “permabull.” No. It’s just that I’m usually bullish because usually that’s what is right to do. The time for bearishness will come. But not yet. Not by a long shot.
Bull markets run on until they don’t. We’re in one and have been since 2009. Until it ends, you have to be in it to win it. To not fritter away your hard-earned dough, don’t buy speculative small stocks. They do best when a bull is new, not years into a long rise.
Instead, buy purebreds — large, high- quality firms. Those usually do best in the back half of bull markets and throughout bear markets.
Put yourself in the shoes of those people who sat out the bull market — until now. They aren’t devil-may-care risk takers. Most of them were scarred by the financial crisis. These folks are now buying comfort stocks — big, highquality, growth-oriented firms with well-known brands, huge market share, diverse product lines, respected managements and fat gross profit margins. Let them bid up your stocks.
Put around 25% of your investment in technology and another 20% in health care, mostly big drugs. Firms are replacing obsolete gear, mobile demand is sky-high and cloud-computing has a forever image. Aging Baby Boomers are powering drug demand. Own the biggest names. Techies like Apple, Alphabet (Google), Microsoft and Facebook. Druggies like Bayer, Pfizer and Roche. Not that each will shine, but a good grouping should.
Put another 20% in financials, but keep it growth-oriented. Big European banks are best — like France’s BNP Paribas and Spain’s Banco Santander. Throw in some consumer stocks, like Nestle.
My least favorite sectors now? Energy and materials — both facing huge supply gluts. Energy prices will remain pressured by rapidly evolving extraction technology. Don’t skip them. Buy a bit to protect yourself if I’m wrong — ones like Dow DuPont, Chevron and Royal Dutch Shell, for maybe 5% of your portfolio. You can skip industrials. They do best early in bull markets.
Oh. I forgot National Sock Day. Always sock some cash away for emergencies. If spending your retirement fretting whether to have pie on Fritters Day or a fritter on Pie Day sounds better than fearing running out of money, you likely need some growth. That means owning stocks in a bull market.