Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
Achieving higher returns is easier than you think.
All you need is the right portfolio structure.
There's no question that having the right stock picks is important, which is why we talk about those frequently - but that's only part of the proverbial equation.
I expect to hear from a lot of surprised readers because I've got a sneaking suspicion that most investors haven't paid much attention to this, and even less about what it means for their money.
Folks who blindly leap from stock to stock, for example, are in for a rude awakening - even if they're investing in the big winners like Amazon.com Inc. (Nasdaq: AMZN), Alphabet Inc. (Nasdaq: GOOGL), Apple Inc. (Nasdaq: AAPL), or Raytheon Co. (NYSE: RTN), that we've covered together.
That's because the risk associated with their money changes.
Sadly, most folks are completely blind to the potential, so they leave a lot of money on the table that could be - rather bluntly - in their pockets. Heck, in your pockets.
As always, I've got a recommendation for you that makes an ideal cornerstone investment for any investor interested in both the truth and higher returns.
Stop leaving money on the table today...
Why Stock Selection Isn't Enough
Like many investors, I grew up thinking that individual stocks were the way to go. Certainly, everything I read as a young man coming into finance - Forbes, Money Magazine, and Kiplinger's, just to name a few - reinforced that notion.
Then I arrived at Wilshire Associates in the late 1980s with a newly minted diploma in my hands and quickly learned how money really works.
My boss, a hyper-focused and brilliant guy named Larry Davanzo, told me in no uncertain terms that portfolio structure was something I'd better come to understand if I wanted to be successful - and with billions on the line, he wasn't kidding. So I spent hours in my cubicle, burning all kinds of midnight oil - and plenty of weekends, too.
Like many professionals at the time, I focused much of my attention on a 1986 study by Gary Brinson, L. Randolph Hood, and Gilbert Beebower, called "Determinants of Portfolio Performance." It examined quarterly returns from 91 pension plans from 1974 to 1983 and concluded that asset allocation accounted for 93.6% of the volatility of quarterly returns.
The implication was huge: If performance comes primarily from asset allocation, then why bother with actively managed stocks and portfolio management?
Life-Changing Profit Potential: One tiny firm is rapidly developing the parts for a game-changing technology - and the gains from its stock, trading for less than $10, could turn every $1,000 invested into $4,719. Learn more...
It was the start of a badly flawed (and disproven) line of thinking that's still embodied today in the concept of passively managed portfolios advocated by well-known, well-intentioned people like Jack Bogle and Burton Malkiel - but that's a story for another time.
Something didn't sit well with me, and it took me years to put my finger on it, not to mention do the math to prove it.
About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.
Do you place your recommended buy into a separate account? I cannot get it into my Ameritrade brokerage account.
Hi James,
Thank you for your comment! The Vanguard fund closed to new investors some time ago, but there are still two ways you can buy shares:
1. Find a broker that was preapproved by Vanguard before the fund closed to new investors; or
2. Open an account with Vanguard and purchase shares of the fund directly from them.
We apologize for not mentioning this in the article. Hopefully one of these steps will work for you, and thank you for reading Money Morning!
Tried buying the recommended play, but not taking new customers. So, what is the next best thing?
Hi Rick,
Thank you for your comment! The Vanguard fund closed to new investors some time ago, but there are still two ways you can buy shares:
1. Find a broker that was preapproved by Vanguard before the fund closed to new investors; or
2. Open an account with Vanguard and purchase shares of the fund directly from them.
We apologize for not mentioning this in the article. Hopefully one of these steps will work for you, and thank you for reading Money Morning!