Most novice investors should be 100% invested in stocks, Fool contributor Tim Beyers says in the following video.
Why? Two reasons. First, if you're fully committed to stocks you'll either need to sell a position to open a new one, or add new cash on a regular basis in order to buy new stocks. Second, you'll be more likely to dollar-cost average, which can reduce the risk of investing in volatile high-growth stocks.
Think of Netflix (NASDAQ:NFLX). The streaming sensation defied skeptics once more in reporting fourth-quarter revenue and earnings, which easily beat estimates. Further expansion in Europe is up next -- France and Germany, specifically, according to a recent report in The Wall Street Journal.
Sound good? Just remember that, right now, you'd be buying at north of $400 a share and within spitting distance of a 52-week high. That's dangerous when you consider that Netflix traded for less than half that -- or $159 a share -- last April. Building a position a step at a time via dollar-cost via averaging with new cash would allow you to gain exposure without putting your existing portfolio at risk, Tim says.
Now it's your turn to weigh in. What's your portfolio strategy? Which stocks are you dollar-cost averaging your way into? Please watch the video to get Tim's full take and then leave a comment to let us know whether you would buy, sell, or short Netflix stock at current prices.
Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Netflix at the time of publication. Check out Tim's Web home and portfolio holdings, or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.
The Motley Fool recommends and owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.