I propose such a portfolio here.The Rational InvestorByDr. Robert SteplemanCareful Investing Can Lead to a Sound SleepBack in December 2009, I introduced the first version of my 'Sleeping Soundly Portfolio.' I will report the results of the 2022 version in January. Here, I'm introducing the 2023 version.The purpose of these 'portfolios' is to provide investors with a starting point for building a 'lower risk' stock portfolio with 'reasonable' return.
High risk in an individual stock is unavoidable; however, by carefully selecting their portfolios' stocks, investors may lower its risk even if some stocks in the portfolio have higher risk. This is done by using stocks that don't zig and zag together and focusing on higher quality dividend-paying stocks. However, there are never any guarantees.The challenge is to construct a portfolio that both has acceptable risk and delivers total returns (capital appreciation plus dividends) that are in line but may slightly lag the stock market when it rises and hopefully outperform when it falls significantly.
However, because of the uncertainty of a recession and how high interest rates may go, this is unusually difficult.In this column, I provide an equally dollar-weighted 12-stock portfolio that's designed to accomplish these and provide dividend income higher than the S&P 500's 1.7%. This portfolio has a yield of 2.7%. I have opted to maintain the portfolio in higher quality stocks even if many of their dividends are only modestly higher than the S&P 500's and one is less, rather than chase dividends.
This year's portfolio is designed in anticipation of a 2023 stock market with a low positive return rather than the negative return of 2022.Caveats: This isn't intended to be a complete equity portfolio. Investors should do their own due diligence before selecting any security.I will track this portfolio on a quarterly basis, assuming no reinvestment of dividends, and making no voluntary changes. The stocks will be 'purchased' at their 2022 closing prices.This portfolio per InvestSpy should be less volatile and could decline less than the S&P 500 if the latter declines.∙ Abbott Laboratories (ABT) is a company in the health care industry.
Its indicated dividend is 1.8%.∙ American Tower (AMT) is a real estate investment trust in the communications area. Its indicated dividend is 2.7%.∙ Caterpillar (CAT) sells construction and mining equipment. Its indicated dividend is 2.1%.∙ Cisco Systems (CSCO) designs and sells internet networking systems.
Its indicated dividend is 3.1%.∙ Coca-Cola (KO) is a worldwide beverage company. Its indicated dividend is 2.7%∙ Genuine Parts (GPC) distributes automotive replacement parts. It's indicated dividend is 2%.∙ LyondellBasell (LYB) is a worldwide chemical company.
Its indicated dividend is 5.6%.∙ Paychex (PAYX) provides human resource solutions. Its indicated dividend is 2.5%.∙ Snap-on (SNA) is a diversified tool manufacturer. Its indicated dividend is 2.7%.∙ United Health (UNH) is a diversified U.S.
health care company. It's indicated dividend is 1.2%∙ United Parcel (UPS) provides letter and parcel delivery. Its indicated dividend is 3.2%.∙ Washington Federal (WAFD) is a bank holding company.
Its indicated dividend is 2.8%.(Disclosure: My family owns AMT, GPC, UNH, WAFD.)All data and forecasts are for illustrative purposes only and not an inducement to buy or sell any security. Past performance is not indicative of future results. If you have a financial issue that you would like to see discussed in this column or have other comments or questions, Robert Stepleman can be reached c/o Dow Wealth Management, 8205 Nature's Way, Lakewood Ranch, FL 34202 or at EMAIL.com.
He offers advisory services through Bolton Global Asset Management, an SEC-registered investment adviser and is associated Dow Wealth Management, LLC.