10 Ways to Bulletproof Your Portfolio: Part II

Editor's note: In today's essay, Alex Green – the chief investment strategist at The Oxford Club – continues the conversation on the 10 ways you can protect your portfolio... In yesterday's essay, I discussed the many uncertainties facing investors today... Just a few things that no one can predict with any certainty are economic growth, […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] Editor's note: In today's essay, Alex Green – the chief investment strategist at The Oxford Club – continues the conversation on the 10 ways you can protect your portfolio... --------------------------------------------------------------- 10 Ways to Bulletproof Your Portfolio: Part II By Alex Green --------------------------------------------------------------- [Urgent Video Update from Whitney Tilson: Operation 'IRON FIST']( Whitney Tilson just recorded a video presentation we're urging all Empire Financial Research readers to watch right now. It's about a massive geopolitical event he's dubbed "Operation Iron Fist." This event could send shockwaves across the markets... upending what you pay at the pump and what you pay for food at the grocery store. It will also hand you a rare buying opportunity you do not want to miss. [Click here now for the details](. --------------------------------------------------------------- In yesterday's essay, I discussed the many uncertainties facing investors today... Just a few things that no one can predict with any certainty are economic growth, inflation, currency values, commodity prices, scientific discoveries, technological breakthroughs, bull and bear markets, election outcomes, and future legislation. That's before we get to possible bolts out of the blue: a major terrorist attack, a hedge fund blowup, war in the Taiwan Straits, an epic natural disaster (think California quake, the big one), a crippling cyberattack, or something we haven't even considered. For all these reasons, it makes sense to take 10 proven steps to bulletproof your portfolio... In yesterday's essay, I covered the first five: saving more, asset allocating properly, rebalancing annually, and avoiding the siren song of the economic forecasters and market timers. Here are the final five steps that will wrap your nest egg in Kevlar... - Cut your investment costs In most walks of life, you get what you pay for. If you eat at an expensive restaurant, you generally get a better meal than at a cheap restaurant. If you buy your suits from Armani rather than Men's Wearhouse, you will almost certainly cut a finer figure. But this logic doesn't apply when it comes to investment managers. Every year, three out of four active fund managers fail to outperform their unmanaged benchmarks. Over periods of a decade or more, more than 95% of them fail. Do you really want to pay hefty fees to someone with less than a one-in-20 chance of delivering the goods? In the investment world, you get what you don't pay for. - Minimize your tax liabilities During my years on Wall Street, I was surprised how many clients paid little or no attention to the tax consequences of their investments. Minimizing your annual tax bite is crucial to reaching your long-term financial goals. How do you do it? - Avoid actively managed mutual funds. Not only do the vast majority of them underperform their benchmarks – see No. 6 – but you'll get hit with regular capital gains distributions, even in the down years. - Minimize turnover. Warren Buffett rightly notes that the capital gains tax is not a tax on capital gains. It's a tax on transactions. So he makes as few as possible, insisting that his favorite holding period is "forever." - Do your short-term trading in a qualified retirement account. This way your gains compound tax-deferred. - Also hold high-yield stocks, Treasury Inflation-Protected Securities ("TIPS"), real estate investment trusts ("REITs"), and taxable bonds in your retirement account. Otherwise, you'll owe taxes on the dividend and interest payments each year. - Outside your retirement account, hold winners for at least a year. This way you'll qualify for more favorable long-term capital gains tax treatment. - At the end of each year, offset realized capital gains with realized losses. You can buy the losing security back after 30 days. - In your taxable accounts, favor individual stocks, equity index funds, and municipal bonds. These allow you to control – or avoid – taxes. --------------------------------------------------------------- Recommended Link: [The EV Story No One's Telling]( Forget batteries, energy storage, charging stations, chips and everything else you've heard about Electric Vehicles... Because the biggest EV story everyone's missing is THIS. It's a brand new asset that the International Monetary Fund claims should rise 24,900%. [Just click here now to find out how to stake YOUR claim in this secret asset today](. --------------------------------------------------------------- - Follow strict buy and sell criteria You should have a checklist for every security you buy and an ironclad discipline for every one you sell. For example, if you are a growth investor, you shouldn't put a dime into a stock until you see competitive products, rising market share, strong sales and earnings growth, a high return on equity, and good margin protections (like patents, trademarks and copyrights). If you are a value investor, you should insist on a sustainable business model, plenty of recurring revenue, a low price-to-earnings ratio or price-to-book value, a high margin of safety, and a sustainable dividend with a reasonable payout ratio. When do you sell? Only when certain conditions are met. In my Oxford Communiqué Oxford Trading Portfolio, for example, we use a 25% trailing stop. Whenever a stock pulls back 25% from its closing high – or our original entry price – we sell. This protects our profits in the good times and conserves our principal in the not-so-good ones. - Hold realistic expectations Have you ever met someone gung-ho on a new diet and fitness regimen? They will tell you that they've given up pasta, bread, and other carbs. They will drink alcohol only on the weekends. (And then just a glass of wine with dinner.) They will go to the gym five times a week. And so on. What happens? A month later, they tell you they gave up. It was too hard. But the real problem was unrealistic expectations. You want to lose 22 pounds in a year? Forget about working miracles. Lose an average of one ounce a day. One ounce. Over 365 days, that equates to 22.8 pounds. That's realistic because ice cream is still on the menu. (Just not the chocolate waffle cone.) The same is true of investing. It takes time to become wealthy. As Leonardo da Vinci famously said, "He who wishes to be rich in a day will be hanged in a year." - Recognize the enemy in the mirror My colleague Bill Bonner, head of The Agora, has a saying: "Investors don't get what they want. They get what they deserve." That pithy remark encapsulates everything I've said in these last two essays... Follow these proven principles of money management and you will be successful because you deserve to be. Of course, it's tough to control your emotions when your life savings are at stake. It's only human to feel excitement or hope or fear or greed. But it's not smart to act on them in your investment portfolio. Successful investors have a battle-tested plan. And they stick to it. That's not because they have the biggest brains. It's because they have the strongest stomachs. Regards, Alex Green Editor's note: Right now, Alex and Empire Financial Research founder Whitney Tilson – two Wall Street legends – are both making the same very surprising prediction... In short, they say that the market is splitting in two. Some financial assets are going to perform very poorly over the coming years... And one specific group of assets is going to perform better than anyone expects. [Get the details here before it's too late to take action](. --------------------------------------------------------------- If someone forwarded you this e-mail and you would like to be added to the Empire Financial Daily e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2023 Empire Financial Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Empire Financial Research, 1125 N. 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