Portfolio - "Investing Approach"

My general approach to investing is:

1. Stocks - I want to think of myself as a businessman, that is, only owning stocks of companies I would like to own completely if I could. As such, I would only want to own a business which offers products or services which will always be in demand in good times or bad. Plus, the products or services are top quality ones and the company is recognized as a great one in its industry. Plus, the company must have a sterling balance sheet, preferably with little or no debt. And, like any business I might own, it must regularly return a good income to me by way of a good dividend which ideally the company regularly raises annually. Hence, one is protected, to a degree, against both deflation and inflation. Obviously, the stock would also offer a reasonable chance of capital appreciation, by way of having a business which offers reasonable growth prospects.

Also, key to stock holdings, are that they must be managed, often adding or subtracting to/from positions as situations merit. Plus, although the goal is to hold a stock forever, as one would a business, a serious adverse situation which faces a company could warrant closing out the position in the stock.

As for speculation, the only way I think it is OK is to buy more of a stock I already own or want to own long-term, thinking it might move up for a short term gain, however since it is a stock I already want to own, worst case is that in case it doesn't go up right away, I just have added to my position at what I think is a cheap price. So, essentially it is a win-win kind of bet, especially as I always recommend keeping some cash in reserve - never being in a situation where I am overloaded with stocks. It should always be remembered that deep and prolonged bear markets are always possible, so stocks by their nature do carry risk. However, one other benefit of considering such trades, is that it keeps the investor more current on stock and market situations, thereby keeping one more informed. Staying informed is key.

Plus, I only want to own companies which I think are in moral businesses. Not tobacco, etc. By doing so, I get some additional feelings of satisfaction. Since there are thousands of stocks from which to pick, I don't see that as a disadvantage.

2. Bonds - I only want US Treasury bonds, notes or bills, the safest of safe. Among them, I might prefer, regular ones which pay fixed interest rate or inflation-protected ones (TIPs), as the situation presents itself. Also, GNMA collaterized debt obligations are OK as they, too, have the full faith and credit of the US government behind them. Like with stocks, positions must be managed.

3. CDs - I only want FDIC (Banks) or NCUA (Credit Unions) insured CDs. Also, I prefer ones of long term duration, mostly five year terms. I do consider these CDs as investments since there is a long-term component to them. However, I also like that they serve the dual purpose as being used as savings, since I only want CDs which have low or reasonable early withdrawal penalties. Again, some protection against both deflation and inflation, plus are liquid investments.

4. Gold or Silver - Not an investment, but reasonable to have a small amount as an insurance policy on our currency. Gold, preferably coins. Silver, preferably pre-1965 90% silver coins.

5. Homes - although I don't own any, it is fine to own one's home, as long as one treats it as a consumer item with only a limited investment component, plus I don't recommend having a large mortgage on it. If a person doesn't have the means to buy a home for cash or maybe 50% cash, he/she should rent, in my opinion. Owning a home has a lot of other costs associated with it, like maintenance, add-ons, etc which many people forget to include when considering buying their home. But, if one just wants to own a home because of choice of lifestyle, therefore recognize it is mostly a consumer purchase. As for buying investment homes, I recommend as a rental property only, using little, if any debt, and which produces net profits which would equal or beat CD rates. Plus, remember, that rental properties mean either being a landlord or paying for a property manager. Being a landlord is a labor-intensive business, so I really only look at it as favorable if a really good opportunity presents itself. As for having a property manager, either way, one of the real risks with rental properties is having tenants which severely damage the property. Therefore, investment homes may sound great, but they come with lots of hidden costs, extra time, and worry - and they are not liquid, sometimes they require a long time to sell.