I often receive emails asking me how one begins investing—and specifically, if you were to follow my advice at Blue Chip Growth. So let me give you my thoughts on the best way to allocate $50,000. Whether you have more or less to invest, the principles remain the same.
First things first. Before you start buying, I want you to think about how much risk you can stomach. Are you comfortable owning aggressive stocks with lots of potential but high volatility? Or do you like to own more conservative stocks that may not give you the explosive returns, but are much more stable?
Everyone’s risk tolerance is different, and in order to accommodate us all, I’ve organized the Blue Chip Growth Buy List into three different risk categories. I usually recommend investors follow my 60/30/10 mix, which means 60% of your portfolio in Conservative stocks, 30% in Moderate stocks and 10% in Aggressive stocks. If you equally weight all the stocks on the Blue Chip Growth Buy List, you will naturally fall within my recommended 60/30/10 mix.
Of course, you can always adjust your portfolios to match your risk profile. I want you to do what’s best for you.
I also recommend that you always start with my Top 5 stocks, which I share with my readers every month, and which are among the strongest stocks on the market as identified by my proprietary ranking system. And always remember to diversify among various industry groups and by risk.
Something else to keep in mind—you should never pay more than 1% commissions when buying and selling stocks. For instance, if your average commission is $50 per trade, you should only buy 10 stocks; with $25 per trade, you should buy 20 stocks and so on.
And if you have a Bank of America account, you might have noticed when you use their ATMs that they are offering “free trades” for accounts with at least $25,000. Full-service brokers also offer wrap accounts (i.e., fixed percentage fee accounts) with free trading. The bottom line is, thanks to new lower transaction costs, thorough diversification is now more possible than ever before!
If you do decide to join Blue Chip Growth, you’ll notice that there are some high-priced stocks in there. Please don’t be afraid to buy just a handful of shares. The important point I want you to understand is that it doesn’t require a large portfolio to be a successful investor.
As I often tell my subscribers, your best defense is a strong offensive of fundamentally superior stocks. That’s why I’m obsessed with making sure that the Blue Chip stocks post much stronger sales and earnings results than the S&P 500. These efforts have served us incredibly well through the years, as we’ve trounced the S&P 500 by more than $3-to-$1!
So there you have a few important points to consider as you get started investing. Now, let’s move on to specifics. I’d like to tell you about one of my newest buys I just recommended in my Blue Chip Growth service—it also happens to make my coveted Top 5 list for the month!
Buy This “Boring” Utility Stock
Now, you might be asking yourself why a utility stock should have you excited to buy. Well, things have changed my friends. Utility stocks are boring no more. These companies are being awarded rate increases left and right. Why?
Well, the stricter emission controls that President Bush signed off on are fast approaching, and utilities are going back to their public utility commissions to ask for higher rates to comply with them.
These new stricter emission controls naturally favor utilities with hydroelectric and nuclear power, since they effectively have no emissions. That’s why several of my new buys have interests in nuclear and hydroelectric power, and all of them should see rate increases as the President’s emission controls are implemented.
The stock I want to tell you about now plays right into this trend. It provides electricity to 4.5 million customers in Ohio, Pennsylvania and New Jersey, three states that are encouraging competition among utilities.
The company’s domestic power plants have a total generating capacity of more than 13,940 megawatts, most of which is coal-fired. To complement its coal-fired power plants, the company also operates lower-emission nuclear power plants. Its subsidiary also trades energy commodities in deregulated markets throughout the U.S.
The company recently reported that its first-quarter earnings rose 37.3% due to higher sales and reduced operating costs. The company earned 92 cents per share compared with 67 cents per share in the year-ago period. Sales rose 9.6% to $2.97 billion. These results were 6% better than analyst expectations.
And the story gets even better. Due to the company’s 14.4 million share repurchase in March and 10.6 million share repurchase last August, its buybacks effectively bolstered earnings by 3 cents per share.
Like most utilities, I look for this company to try to boost its nuclear power generation capacity and continue to reduce emissions on its coal-fired plants through more sophisticated technology (called “scrubber” technology). This translates into more rate increases, and thus more pricing power. And when you add in a nice 2.8% dividend, this stock should be at the top of your buy list today!
“>Get the name of this stock now—plus all of the other top stocks on Louis Navellier’s Blue Chip Growth Buy List today. “>Join Blue Chip Growth today and you’ll get full access to Louis’s complete Buy List, his forecast for the second half of 2007 PLUS access to PortfolioGrader Pro—his exclusive online stock-rating system for nearly 5,000 stocks! Louis’s recommendations in Blue Chip Growth gained over 188.37% from 1998 through 2006. It’s your turn to profit from his newest recommendations! “>Click here to get started now.
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