Saturday, February 26, 2005

Investment Strategy 2005

I spent some quality time looking at the asset allocation of my investments the past few days and it was way over due. It's something I should do on a weekly basis, well lets get real, on a monthly basis and that's the commitment I've made with myself.

Things have been pretty good investment wise the past 12 months. My portfolio has done pretty well. I'm a long term investor being 39 years old and still am looking at a 20 year + or - horizon. For that reason I'm 80% Stock and 20% Bonds.

Here is my thoughts for 2005 relative to investments:

1) The dollar will remain relatively weak compared to foreign currency

2) Inflation will also remain relatively low.

3) Oil will remain relatively high but I think it will come down gradually over the full year of 2005.

4) The US economy will continue to grow at a relatively mild but steady rate in 2005 ( nothing big but steady )

Based on this, here are my bets:

1) International Stocks are still a good play. I plan to increase my holdings slightly. I will keep a real close eye on the dollar however and if it starts to edge up I will decrease the International holdings.

2) Mid & Small Cap stocks are also still a good buy I think. In an economy like we are in, a slight but steady increase of the economy, the small and mid size companies tend to benefit the most. Rates should remain low and with capital cost low they should do well. Again keep an eye on the cost of funds and if they rise I will cut back on this sector.

3) Increase my Value vs. Growth holdings on Large Capital holdings of US stocks. The Value sector has had a very good 18 plus months and I think with the current economy they will continue to. If the economy starts to heat up and really grow then I will decrease Value and move more into Growth.

What my asset allocation will look like in 2005:

- Large Cap Stocks 40% with 60% of it in Value and 40% in Growth.

- Mid & Small Cap Stocks 25% evenly split 12.5% each.

- International Stocks 20% with not too much in China. I think that Chinese stocks will weaken as we go through 2005.

- Bonds 15% with 70% corporate and 30% government.

- Cash will be 0%

I'm not an investment advisor, but I think the above mix will have a pretty decent chance to return good returns in 2005. If you have not sat down and reviewed your asset allocation and considered how it matches up with you retirement and family needs, its the perfect time to do so. Fidelity and Vanguard have good sites to review your allocation and its easy and informative for people of all investment level knowledge. Here is to great returns in 2005!