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ID-100203460The beginning of the year is when it seems like every financial website puts out its top or worst stocks. In that vein, I offer my 15 recommended stocks for 2014 – or at least the first half of the year. I cannot list the worst stocks, as there are too many of those to list. I can at least list the 15 recommended stocks that will give you a good basis for the first half of 2014.

Many sites do all year lists, but I am only committing to this list for the first 6 months. There is a great reason for this. It is almost impossible to predict the market farther out than 6 month. In fact, it is quite possible for the market to do a massive correction and even this list would be a fallacy. There is always some risk with any investment and you are encouraged to read this site’s disclaimer before acting on this list.

I would expect all of these companies to maintain their status as Good Companies on my Watch List. I would not expect all of them to make a top 15 recommended stocks list at the end of June. Some of them will grow a bit slower than I expect, and a couple of the 15 recommended stocks are probably going to lose money. As Peter Lynch famously said:

“In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”

By Peter’s standards, I hope to right on this list with 9 of these picks. I don’t expect all 15 recommended stocks to be massive growth stocks in the year. I also think the list is successful if the list of 15 beats the S&P 500 and the Dow30. In July, perhaps I will publish a list for the second half of the year.

If we would go back in time (starting from December 1) and buy the 15 recommended stocks 3 years ago our portfolio would have grown very nicely. These stocks would have appreciated by 73.35% year over year. They would have grown 184.79% over the last three years. These stocks would have beaten the market (as measured by the Dow Jones Industrial Average) for the last three years by 330.57%. In the past year, these stocks would have beaten the market by 212.17%. With that track record, we should expect good results in the next 6 months.

All of the stocks on this list are rated as Good Companies using the method that I describe in my book The Confident Investor.  You can purchase my book wherever books are sold such as Amazon, Barnes and Noble, and Books A Million. It is available in e-book formats for Nook, Kindle, and iPad.

The 15 recommended stocks were chosen from Good Companies on my Watch List. This means we already know they are fairly well managed and have a history of solid growth. While all of the stocks on the Watch List are Good Companies, these 15 recommended stocks seem to be the most well setup for aggressive growth in the first half of 2014.

The 15 recommended stocks for the first half of 2014 also performed very well over the past year and the past 3 years. As I have written before, the past is not a perfect indicator of the future, but it is probably the best indicator that we have to use.

I didn’t try overly hard to make this list of 15 recommended stocks to be a balanced portfolio covering multiple industries. I am happy to report that it isn’t a terrible unbalance. The most glaring omission is that it is very light in banking and in consumer technology. I simply could not find a banking stock that was worth the risk compared to other industries. Also, the consumer technology vertical is simply not performing that well right now. I anticipate that trend to continue for the next few months at least.

It might be possible to criticize this list by its heavy reliance on healthcare and retail. That would be fair but, once again, I wasn’t trying to get a perfectly balanced portfolio.

If you want a more balanced portfolio, you may want to consider some of the Honorable Mention stocks at the end of the list. Also, I always maintain that you should have approximately 30% of your portfolio invested in index funds. These funds should be divided by large and small cap funds, an index bond fund, and an index international fund. This would help to balance your portfolio.

You could also look at the Watch List of stocks. These stocks have shown that they are well-run companies. If you are concerned about a balanced portfolio, I suggest that you compliment the 15 recommended stocks with a couple stocks from the Watch List.

The list of 15 recommended stocks for the first half of 2014

  • ABMD
  • ALXN
  • BCPC
  • BLK
  • BWLD
  • CBI
  • CERN
  • GPOR
  • PCLN
  • QCOR
  • SAM
  • TMO
  • TSCO
  • UA
  • ULTA

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When asked if they would rather be smart or dumb, surely everyone would answer smart! If you’re looking to improve your mental capabilities you can start by following in the footsteps of some of the smartest people in the world.

A person’s Intelligence Quotient indicates their mental abilities relative to others of approximately the same age.

  • Average IQ= 100
  • Above Average=115
  • Genius= 140
  • Extraordinary Genius=160

I have often wrote that you do not need to be a genius to invest in the market. In fact, the market is not always kind to smart people. Most of the math is adequately done with math that you learned in 4th grade math class. Even still, it is interesting to look at the habits (good and bad) of those that appear to be extremely intelligent.

 

The Habits of Smart People
Source: Online-PhD-Programs.org

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ID-10044378There are a few things that every investor can do to help ease the process of saving for retirement. Here are 10 activities to help with retirement planning.

1. Start investing early

The earlier you start saving; the more compound interest can working for you. For each year you delay saving, the higher your monthly contribution will need to be to achieve the same targeted amount. The law of compound interest shows that starting in your 20s means it will be a lot easier to be wealthy; however, if you are just getting started – don’t despair.

2. Make additional savings

Whenever you save on a major expenditure, you should put part of that savings into your retirement. Get in the habit of putting half of the savings on the “great deal” at the store into your retirement account. If the recliner is $100 off this month, put $50 into your long-term savings account. This will help to reduce impulse purchases on “great deals” and it will also help you grow your savings even more quickly.

3. Keep up with inflation

Your monthly contribution to your retirement account will diminish in real terms over time if you don’t adjust your contributions in line with inflation. This will result in you contributing less than you think you. Investing more, as well as investing slightly more aggressively, could lead to an even higher return over time.

4. Expose yourself to growth assets

To keep pace with inflation, you will need a certain allocation in growth assets, such as equities, in your portfolio – even post-retirement. I advise people to follow the investment strategies of my book, The Confident Investor, well into their 70s if not 80s. Assume you will outlive the oldest person that you know right now.

5. Diversify

While the majority of your income should be in direct equities using my Watch List as a guide, you should have 20-40% of your portfolio in index funds. These index funds should be a small cap, large cap, bond, and international.

6. Stick to your investment strategy

I strongly suggest that you follow my Grow on Other People’s Money strategy. However, if you don’t feel comfortable with that strategy, find one that works for you and stick with it. Nothing will destroy your portfolio more than panic selling.

7. Look after your health

You should prioritise health and medical care when saving for retirement as medical costs can form a large percentage of a retiree’s spending. It’s well documented that medical inflation is much higher than general inflation. Nothing is enjoyable without health, so staying active and doing everything you can to stay healthy should be a priority at any age.

8. Keep active and interested in life

Retirement options aren’t what they used to be. These days retirees are opting to start new businesses and even further their studies. These activities can give meaning and purpose to your golden years while allowing you to continue playing a role in the economy. The message is clear – don’t stop planning, working or dreaming.

9. Read about the market

You have already started this habit if you are reading this site. Read my book as well and other books on investments. You should never stop learning.

10. Take responsibility

No one said it was going to be easy. But you can do a lot for yourself by taking an active interest in your investments, reading and staying up to date on the markets. Products change and sometimes investment views change too. So be informed, ask questions and take control of your future, starting today.

Image courtesy of Ambro at FreeDigitalPhotos.net

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ID-10099202Most people that I speak to regarding investing strategies will tell me about their employer stock program. Using this program, you are investing in your employer at a discount from the market rates.

A typical employer investment program will allow you to save a portion of your after-tax regular paycheck into a special fund. This is a great strategy as it allows you to pay yourself first before any other bills are paid. I applaud this type of program! However, doing this doesn’t make investing in your employer a great deal.

The second step of the investment program that provides investing in your employer will vary somewhat from employer to employer. Typically, the employer selects a period of time of either 3-months or 6-months. The value of the stock to be purchased is determined by either the lowest of either the start or the end of the period. In some cases, I have heard that the average of the start and end are used. The employer may elect to give a discount from that price, as well. The discount can be 10% or 15%.

This can make investing in your employer seem like a great deal. You have an automatic savings program that allows you to buy at the best price over a period of time. The employer may have even subsidized the investment which further increases your profit.

Unfortunately, this is where the good habits tend to stop. I have seen people that use this type of program develop an effective portfolio where 20-40% of their portfolio is in their employer. This is way too high for any single company and even worse for your employer. Remember, you are already investing your time every week in that company. They are providing 100% of your income.

Think of your paycheck as a dividend check based on your labor. You are investing your daily work time into that company, and in return you are receiving a dividend check for that effort. Under that scenario, your employer already plays an extremely large portion of your portfolio. By investing in the company as well, you are committing an outlandish portion of your net worth to one investment.

So what is the solution to investing in your employer?

If your employer is subsidizing the program by discounting the purchase by at least 5%, you should participate. Investing in your employer for the short term will then make good economic sense. However, once the investment in your employer reaches 5% of your portfolio, you need to start liquidating the stock. You could do this on a LIFO (Last In First Out) basis and immediately sell the stock you just bought at a discount. You could also do it on a FIFO (First In First Out) basis and sell the shares you first accumulated in the program.

Avoid investing too much in the stock of any company that you currently work for. You are essentially doubling your risk. Should something go wrong with the company, you are looking at losing both your investment and paycheck at the same time. Although, if employee shares can be purchased at discount, it might be a good bargain and worth purchasing. While it is fine to support your company by purchasing stock, you do not want your portfolio to consist mainly of that one investment. When you put all your faith in one stock and it does not perform at the level you expected, you can end up losing all or most of your investment as the price of the stock falls or if a company goes out of business. This is even more painful if you lose your job, as well.

Image courtesy of smarnad at FreeDigitalPhotos.net