Diversifying For Growth

Lisa Battle is replacing an aggressive investment strategy with a more moderate approach

Like many married women, Lisa Battle let her husband handle the family finances, including their retirement accounts. “He was just better at that,” she recalls. “It was something that he wanted to do, so I just followed his lead.”

That was fine until she divorced her husband and had to invest money on her own. Having only done temporary work during her 15-year marriage, Battle had never invested her own money before. Now, she was taking on a full-time job that came with a 401(k) investment plan, and she also had a lump-sum settlement to invest right after her divorce was finalized in 2000.

Battle laments, “I was not very knowledgeable about the stock market,” when she began investing with her first financial advisor. Consequently, she ended up creating a very aggressive investment portfolio that included tech stocks such as WorldCom and Sprint, instead of a more diversified, conservative portfolio suitable for a 44-year-old divorcee. As a result, she wound up watching a bearish stock market claw $50,000 out of her $70,000 investment portfolio in less than two years, before she stepped in to stop the bleeding.

Battle, who is now an administration coordinator at a marketing communications agency in St. Louis, Missouri, took the $20,000 that she had left and turned to Pamela Bonds, an investment representative at Edward Jones in Olivette, Missouri. Bonds and Battle crafted an investment strategy that was more diversified in its approach and therefore less risky. Today, her portfolio’s investment style breaks down as follows: 46.9% growth and income, 28.5% income, 18.4% growth, 3.5% aggressive growth, and 2.7% in cash. Instead of the volatile tech stocks she previously owned, Battle now has a broader mix of stocks that includes blue chips such as Anheuser-Busch (NYSE: BUD), Wal-Mart (NYSE: WMT), Walgreen Co. (NYSE: WAG), General Electric Co. (NYSE: GE), and Wellpoint Health Networks Inc. (NYSE: WLP). “I’m really interested in Wellpoint because healthcare is a growing field, particularly with more people getting older,” Battle says.

To bolster the income portion of her portfolio, Battle holds the bonds of companies such as the CIT Group (NYSE: CIT), which yields a hefty 5.75% return. She also invests in the Bond Fund of America mutual fund. Her portfolio gains are reinvested or used to invest in more securities. “This new diversified portfolio including stocks, bonds, and mutual funds should provide a steady source of fixed income for Lisa, while producing higher returns with less volatility in spite of a weak economy and sluggish stock market,” says Bonds.

Since May 2002, the strategy Bonds crafted has increased Battle’s initial investment from $20,000 to $24,000. Battle has another portfolio worth $35,000 that is made up of 50% mutual funds and 50% stocks. Bonds’ strategy has worked so well that Battle is considering using the same diversification strategy with that portfolio, as well as in her newly established 401(k) plan. “I’m doing this for the long term and saving now for retirement because I have to be able to take care of myself when I

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