|Course 307: Getting More Conservative|
|Subdue Your Stock Mix|
Lessen your portfolio's volatility by exploring the following options among U.S. stocks.
Very Large Companies
But the faster the growth and the smaller the company, the more volatile the stock, too. So if curtailing volatility is your goal, focus the U.S. stock portion of your portfolio on the very largest companies. They may not have the same growth potential as smaller companies, but they don't have the same volatility, either.
If you are looking for a good large-company stock fund, you can find ideas by using an online Fund Screener or Stock Screeneror browsing analyst recommendations such as Morningstar.com's Fund Analyst Picks, which are available to Premium Members or those taking a free trial.
Let's take an example. Acme Cement Company's stock price falls from $100 per share to $95 per share in one year. That's a 5% loss. However, the company pays a $7.00 per-share dividend each year. At the end of the year, shareholders have a $95 share price and a $7 dividend. So they haven't really endured a 5% loss. It's really a gain, thanks to the dividend.
Dividends won't always turn losses into gains. But they can curtail volatility.
You can find potential investment ideas by using the Morningstar Screen of High Dividend Yields.
Reasonably Priced Stocks
If the earnings, sales, or cash flows of these companies don't live up to expectations, however, their stock prices can plummet.
To avoid such price dives, stick with companies whose stocks are trading at moderate prices relative to their earnings, sales, and/or cash flows.
Find ideas by using the Morningstar Screen of Low-Priced Growth Stocks.
Next: Tone Down Your Foreign Mix >>
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