FULL DISCLOSURE:
I am not a financial advisor. This post is to provide information and not provide financial product advice. I discuss why I personally chose to invest in a stock, ETF, REIT, investment fund or cryptocurrency (which I have held for over a week) and also share information that is public about the following stock, ETF, REIT, investment fund or cryptocurrency and they are based on my own personal opinion.
I will not blog about any positions of stocks, ETFs or REITS and cryptocurrency which were initiated just within the last 72 hours of posting this blog article.
It is recommended that you should always consider visiting a financial advisor for independent financial advice before making investment decisions.
I do not work in the financial industry, so just because I write about it, doesn’t mean you should own it. So, consult with a financial advisor and do your due diligence, RESEARCH!
I am not receiving compensation by the company for this blog post.
I have no working relationship with any company whose stock, ETF, REIT or cryptocurrency mentioned in this blog post. Nor do I have a family member or friend who works with the company.
When you talk to people about investing, through these discussions, you can tell what kind of investor they are.
When it comes to investing, for me personally, diversification for my investment portfolio is important.
And today’s topic is about diversification. And for this topic, let’s focus on stock investments specifically, not cryptocurrency (which I also invest in).
There are people who invest in companies they love and have a high conviction for. For example, I know people who say they focus on Apple, Facebook, Microsoft and sometimes that’s it. Or due to the pandemic, they invested in Pfizer, Moderna or Johnson & Johnson.
The thought idea is invest in these stocks, they will go up like crazy and they can make a lot of money.
I can understand, if one invested in Amazon when it first went public, they would have made a lot of money considering it’s over $3,000. Even five years ago, what was $717, it went over $3,000 in July 2020.
The fact that they invest is cool but when they ask what I invest in, I tell them this…
I believe in diversification, so I invest in all 11 GICS (Global Industry Classification Standard) stock market sectors.
Long time investors get it, some don’t. But the reason why I diversify is because it gives you a well-balanced portfolio, when a few sectors go bad, other sectors go up.
But in technical terms, Diversification across stock sectors helps to mitigate idiosyncratic or unsystematic risks caused by factors affecting specific industries or companies within an industry.
So, I diversify.
The 11 GICS stock market sectors are:
- Energy
- Materials
- Industrials
- Utilities
- Healthcare
- Financials
- Consumer Discretionary
- Consumer Staples
- Information Technology
- Communication Services
- Real Estate
And within these 11 sectors are subdivisions into 24 industry groups such as automobiles, banks, apparel companies, etc.
A big example of that is shortages of semiconductors. Because there is not enough, we are seeing automobile companies, computer companies and anything depending on semiconductors being affected. Lumber and concrete shortage, we are seeing home building being affected.
We are seeing these factors affecting specific industries, while others benefiting from it.
During the pandemic, many people can’t travel, no travel affects the airline, cruise industry, energy companies (oil), but because people stayed at home, we saw people do other things such as watch movies at home, conduct meetings or met with friends online through video streaming applications and this is just one example.
Recently in 2021, we have seen the technology sector and energy sector who are often strong, take a hit. While we saw industrials, real estate, consumer discretionary and financials do well.
But in truth things change so often, that many financial advisors have advised to diversify and the need to prepare for the volatility in the market, especially if interest rates were to go up.
I see people who invest in a stock like Twitter and then see it reach highs like $79 and then drop to $51 a few months later reaching lows.
And I see people getting freaked out about it. And I understand, no one like’s seeing their investment in the red. But some panic sell because they are so used to seeing a stock at its highs, rarely dropping so much.
But that’s the nature of the market, you need to prepare for it by diversification. A well-diversified portfolio means having access to as many sectors as possible. To not concentrate on a single sector or related sectors.
I do things a little different, where I have ten sectors balanced, but one sector, I do have more, which is real estate.
Because I believe in passive income, I’m a dividend investor and I invest in stocks for each sector that pay good dividends and I have a lot of investment going towards REITS.
I’ll reveal my complete portfolio for 2021 later but for examples of my investments in a few of the sectors, here are a few positions I have in the following sectors:
- Materials – I invest in Applied Materials, Air Products and Chemicals Inc., numerous gold, silver and copper companies.
- Industrials – I invest in 3M, Caterpillar Inc., Nucor, Boeing, Honeywell International
- Utilities – I invest in Duke Energy Corp., Nextera Energy Partners, Nextera Energy Inc., Southern Co., water ETFs and alternative fuels
- Healthcare – I invest in Bristol-Meyers Squibb Co., Abbvie Inc., Merck & Co. Inc.
- Consumer Discretionary – I invest in Kimberly-Clark Corp., Procter & Gamble Co., Unilever PLC, etc.
- Consumer Staples – I invest in Home Depot, Pepsi, Lowes, Starbucks, Costco
- Information Technology – I invest in Microsoft, Apple, Broadcom, Cisco
- Communication Services – I invest in AT&T and Verizon
- Real Estate – I invest in REITs such as O, LTC Properties, Highwood Properties, to name a few.
And then I also invest in sector-based ETF’s as well. For example, for Materials, I have XLB (Materials Select Sector SPDR Fund), for Real Estate I have XRE (Real Estate Select Sector SPDR Fund), for Utilities I have XLU (Utilities Select Sector SPDR), for Financials I have XLF (Financial Select Sector SPDR Fund), for Consumer Staples,I have XLP (Consumer Staples Select Sector SPDR Fund) and more.
What I’m currently working on is having 50-100 shares for each position in the next 2-3 years. Some positions, I aim to have about 1,000 shares for each position.
Again, my investment strategy is focused on dividends and this does not include my 401K, Roth IRA or my mutual fund investments.
It’s going to take awhile, but its a strategy which has worked out for me as my goal is to reach over a $100 monthly, then achieve milestones such as $250 monthly, $500 monthly, $750 monthly, then $1,000 monthly. If anything, taking baby steps.
But the goal is to achieve $50,000+ in dividend income annually.
But this is my current strategy, it may change, it may not but I wanted to show a little of my investment portfolio and how I have diversified.
As always, perform due diligence and do a lot of research before investing. Talk to a financial advisor to devise an investment strategy that works for you!
