Preserving Your Portfolio

Our panel of expert money managers shows you how to make sure your earnings from the current market rebound don't get washed away

I would advise individuals that things are going to get better. If they think about a typical asset allocation of roughly 60% equity, 40% bonds, [I would] reduce the allocation of bonds, in general, because interest rates are likely to go up. I would increase my allocation to equity because of the positive, fundamental backdrop [to the economy]. But, I would make sure that I put money into various mutual funds, steadily, instead of buying in a lump sum and holding.

B.E.: Any particular type of mutual funds?

DIAMOND: I’ll tell you what I did for myself and for my three kids. I have 60% in Vanguard’s S&P Index Fund, so the core of my equity composite is in the Standard & Poor’s Index. Then, I play on the margin. I’d place 15% in an international equity fund, because I think growth is going to be much stronger outside of the U.S. than inside. Then I’d put 15% in technology funds because I think that there is going to be a huge pickup going forward, globally, on business investment and that area is going to be attractive. And then I balance things out with a high-yield bond fund. That’s what I’ve done for each one of my kids because they have a long time horizon.

B.E.: Is it a good idea for investors to do the due diligence and choose strong individual stocks as opposed to going into mutual funds?

COLEMAN: We succeed, as investors, by identifying companies that we believe in, and the litmus test for whether it’s worthy of us is generally on the consumption side. Do we consume, in one way or another, this product or service and are we satisfied? That is the first connect. Any individual has that experience, whether you are consuming Starbuck’s coffee and, therefore, like the company or you like to shop at Wal-Mart. You like Microsoft software because it makes you more productive. There are things that touch our lives and they tend to be publicly traded companies, so we identify them. Hopefully, you can do the kind of analysis tha
t gets you to that point of comfort with a company–then it’s really about waiting. You find a good idea and you wait. Anheuser-Busch is a company that has been delivering about 15% compounded, to its investors, for about 40 years. Well, 15% compounded for five years doubles your money. For 10 years, it gives you four to one. Well, if you consume that product and you like it, then it’s a smart thing to buy the stock and let it be. So much of succeeding in investing is about being patient. It’s about making a very good decision and then watching it work, letting time create the value for you.

CRAIG: The Internet allows you to have access to pretty much the same type of data that professional investors have. You can research your own stocks, but it takes a lot of time. For those who do not want to devote the time and

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