You should never put all of your investments in one stock. It has worked splendidly for some and has been devastating for others. Many reading this had all their money in GM or Lilly. Both witnessed glory days and gory days. I strongly encourage an understanding of risk before lumping your investments into a very small pot.
CNBC called Tuesday afternoon and asked me this very question. The answer is tough because it depends on so many variables and things that simply cannot be known. We tell our clients that the ability to react to what the market gives us is more important than the ability to predict what will actually happen in the economy!
When backed into a corner, the best place to invest right now is technology and basic materials. Yes, I know that is two sectors! I will address technology this week and basic materials next week.
Technology is in the sweet spot. Specifically, technology centered on application software that either increases efficiency in business or makes life better. Many of these applications are aimed directly at communication devices, but there is even more than that.
A full one third of the cash on balance sheets within the S&P500; belongs to technology companies. One of the themes we are using right now is “no credit in either direction.” In other words, we don’t want the company to make items where the majority of buyers have to be able to access credit to buy the product, and we don’t want the company to be in major debt while the product sits waiting to be purchased.
As of the end of June, companies within the S&P500; that have the majority of their revenues coming from overseas are up 16 percent thus far compared to stocks that have the majority of their earnings produced in the US – which are up 2 percent.
We find ourselves in the middle of economic uncertainty and businesses are doing everything in their power to rein in costs and increase productivity. That objective has software written all over it! There is an old expression that reminds people to paddle downstream when you can. Cleary some folks can paddle upstream but it is hard work. The current administration is worried about carbon and other “green initiatives” and in most cases – though not all – technology matches the political agenda.
Bottom-line: technology companies have cash in a cash-strapped world. The adoption of smart phones and broadband internet by all age groups continues to astonish retail specialists. The software coming out today provides compelling rationale for businesses to invest in upgrades for both efficiency and productivity. We live in a world with increasing government regulations and technology companies appear flexible to change if need be. Don’t put all your eggs in one basket, but technology is a great egg!
Joseph “Big Joe” Clark is a Certified Financial Planner and the Managing Partner of the Financial Enhancement Group, LLC. He is a Registered Principal offering Securities and Registered Investment Advisory Services through World Equity Group, Inc, member FINRA/SIPC. Big Joe can be reached at bigjoe@ yourlifeafterwork.com, or (765) 640-1524.
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Big Joe Clark: Best egg in the basket
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