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Get the Right Stocks in Your Portfolio

By Rex Moore - Updated Apr 6, 2017 at 10:29PM

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To know where you're going, you have to see where you've been.

This article is part of our Rising Star portfolio series.

My real-money Rising Star portfolio is designed so you can follow along and achieve a well-rounded, diversified portfolio of your very own. Now that I'm a few recommendations in, I want to step back and assess where we are at this point.

First, here's a look at the stocks I've bought and their performance to date:

Company

Date Purchased

Return

Coca-Cola (NYSE: KO)

Nov. 30, 2010

6%

Coca-Cola

Dec. 31, 2010

2%

lululemon athletica (Nasdaq: LULU)

Jan. 12, 2011

23%

Johnson & Johnson (NYSE: JNJ)

Feb. 28, 2011

(2%)

Abbott Labs (NYSE: ABT)

Feb. 28, 2011

4%

lululemon athletica

March 24, 2011

13%

II-VI (Nasdaq: IIVI)

April 5, 2011

(2%)

So far, so good. There's no way to draw any meaningful conclusions after just a few months, but getting off to a good start is certainly better than the alternative!

When I started the port, I established the following allocation guidelines:

Large caps

45%

Mid caps

15%

Small caps

15%

International

25%

I won't be too much of a stickler about hitting these percentages, but this is a pretty good guideline for most people. After buying five stocks over seven different purchases, here's how it shakes out so far:

Company

Market cap (millions)

Size

Value

% of Port

Coca-Cola

$155,200

Large

 $1,080.32

28%

lululemon athletica

$6,600

Mid

 $1,283.94

33%

Johnson & Johnson

$163,400

Large

 $477.16

12%

Abbott Labs

$78,500

Large

 $505.75

13%

II-VI

$1,500

Small

 $542.08

14%

Totals

   

 $3,889.25

100%

So that gives me 53% large-cap exposure, 33% mid-cap, and 14% small-cap. I have exposure to health care, retail, technology, and however you want to define Coca-Cola (sugar water industry?). I really like the way things are shaping up.

It's also pretty easy to see where our next stop should be: international. This is sort of a squirrely category to begin with (to use a technical term). After all, Coke, Johnson & Johnson, II-VI, and Abbott Labs all have more than half their sales overseas. But all my stocks are headquartered in the U.S., and I do want to branch out some more to get some internationally based companies in the mix.

Why? Increasing your exposure to foreign stocks, up to a certain point, both raises your expected returns and lowers your risk. It's what Princeton professor Burton Malkiel calls "the closest thing to a free lunch in our world securities markets." Not buying foreign stocks, says Wharton professor Jeremy Siegel, "is a risky strategy for investors."

In my next article, I'll show you how to construct a screen that will provide us with a great list of international candidates. Until then, feel free to keep up with my tweedlings on Twitter.

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Stocks Mentioned

The Coca-Cola Company Stock Quote
The Coca-Cola Company
KO
$64.38 (2.34%) $1.47
Abbott Laboratories Stock Quote
Abbott Laboratories
ABT
$110.22 (1.45%) $1.57
Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$179.52 (1.13%) $2.01
Lululemon Athletica Inc. Stock Quote
Lululemon Athletica Inc.
LULU
$263.38 (-3.39%) $-9.23
II-VI Incorporated Stock Quote
II-VI Incorporated
IIVI
$49.13 (-3.57%) $-1.82

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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