In this clip from "Financial Planning Q&A 60" on Motley Fool Live, recorded on Jan. 26, Motley Fool contributor Robert Brokamp discusses how much he prefers to keep in the stock market and in cash and the requisites he uses to balance his portfolio.
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Robert Brokamp: First of all, you're never going to know whether you're jumping in at the right time. On Fool Live yesterday, we were talking about stocks that were down significantly at one point and that recovered, and I used the example of Starbucks (SBUX 0.68%), which, in 2006, was almost $20 and, by 2009, had dropped to $4. Then, it didn't get back to $20 again until 2011. Now it's almost $100, and it's outperformed the S&P 500. That was a stock that was down significantly. It was basically flat money for five years. I did buy it when it started to fall, but I got in early. I didn't hit the exact bottom. I bought in, I think, late 2007 maybe. But regardless, because I still bought then, I've been very happy, it's been a great investment for me. You can't time that perfectly. Here's what I'll just give as my process, and that is this. I don't plan to retire for 15 years so most of my money is in the stock market. I like to keep about 10% out. Once that cash position drops to close to 5% because my stocks have done so well, I start to sell a little bit or I actually just start doing things like stop reinvesting dividends and let the cash accumulate. Then, if the market goes down and my cash position gets closer to 15%, that's when I start to buy. Like you, I rely on Motley Fool services for my stock ideas. I look at the best buy list on the various services that I follow and I start buying from there. I don't know if that's helpful, but I would also say, look to the services that you are following with some direction because many of them will provide direction in terms of which stocks they consider most attractive at this point.