Model Portfolio eugeneg:EMF

I am a reverent believer in asset allocation and its ability to help a portfolio in any market situation.

A properly allocated portfolio can stand up better in any market than one where the investor or manager is picking the next best stock.  The positions in the portfolio should be acting for the greater good of said portfolio and not independently of each other.

When I chose a position to join my fund, I take a top down approach. First I look at the overall market economy, then I look at the specific sector, followed by competitors then lastly I look at the technical analysis of the stock. I chart it out first by 3months, then 1year, then 5years. I need to see what its general trend is, is it up down sideways, how many times has it broken up or down in its bands. What are the pricing spreads? Then I look at its divided and P/E. By taking this approach I can be reasonably certain that the position will perform well. By no means is this a fool proof way, but it gives a good idea if this is a worth while investment.

I also believe in keeping a good percentage of cash on hand to buy into a down market. Right now I believe that the battered financials have basically hit bottom and it’s a good time to buy back in, or take even larger positions.

Hedging the portfolio is also necessary to help protect during a recession. Precious metals, materials are good examples of hedged investments that help protect the down side exposure.

Keeping a disciplined approach to asset management is a key component, because if an investor gets to greedy and the portfolio becomes unbalanced it could hurt the overall long-term return.