Time to Redefine a Well-Rounded Portfolio

Merry Christmas, folks. I hope you all are having a wonderful holiday.

I know the markets are.

Stocks were off to another strong week heading into the 12 days of Christmas.

This sets us up for another potential record-breaker by New Year’s Day.

Seasonal factors combined with the end-of-year Santa rally appear ready to provide a nice tailwind. More importantly, strong positive sentiment that we will soon start winning the fight against COVID is another factor to consider.

It’s important to understand that the market and the economy are different animals. But when economic projections indicate that quarterly GDP could rise 3%–4% each quarter through 2021, I like my chances in the market.

Of course, leading the way right now are still the high-flying tech stocks.

It’s a theme that if you’re ignoring, you are doing a grave disservice to yourself. The Nasdaq Composite Index has notched numerous new highs and vastly outperformed the Dow and S&P 500, despite rampant tailwinds in 2020.  

Source: Stockcharts.com

And in the wake of a massive resurgence in cash that I expect will rush into public equities, I firmly believe the continued success of tech stocks says something very important about this sector.

And this means you need to blow up your old portfolio and start looking at the markets entirely differently.

Tech Staples to Make You Rich

You probably have more silicon processors in your house than you do cleaning products.

In my opinion, that makes certain technologies consumer staples. The thing about staple stocks is they’re noncyclical. This means they don’t jump (or crash) on seasonal demand or headline noise.

So as the Nasdaq, led by the tech sector, continues to break into new highs, it’s fair to suggest that some tech stocks aren’t cyclical either.

We could go back and forth for days on the minutiae of the argument, but the point is in a tech-fueled world, we need to at least consider some tech stocks are more like hybrid tech staples.

Value and growth at the same time.

Just take a look…

Some of these big names in tech are starting to pay dividends, a classic characteristic of more low-risk stocks. Microsoft (NASDAQ: MSFT), for example, pays a 1.05% dividend and has grown that for 16 years now.

And look at the growth you get along with that over the year.

Source: Stockcharts.com

MSFT wins, hands down. And you get an OK dividend to boot with this tech staple. But that’s a low-hanging fruit.

Here’s another tech staple to consider: chipmakers.

Advanced tech like 5G networks, quantum computing, and other next-world technological solutions require the most advanced chips imaginable to work. For example, the sheer amount of data that will be sent along a 5G network is on a level that most of us have trouble actually quantifying.

All those bits and bytes amount to counting pebbles on a beach.

So when I walk back the supply chain and see a company like Taiwan Semiconductor (NYSE: TSM) perfectly positioned, snapping up contracts, and offering innovative solutions to clients, it becomes a stock I want to own and sit on — and, with the right size position, watch it grow into a huge nest egg.

The chart doesn’t lie:

Source: Stockcharts.com

And what these two examples show us is that we’re actually right in the midst of a fundamental shift in the way to build a well-rounded, lucrative portfolio.

Simply put, consider making a few tech staples like TSM or MSFT a cornerstone of your modern portfolio.

Have a Merry Christmas. 

To your wealth,

Sean McCloskey
Editor, Energy and Capital

@TheRL_McCloskey on Twitter

After spending 10 years in the consumer tech reporting and educational publishing industries, Sean has since redevoted himself to one of his original passions: identifying and cashing in on the most lucrative opportunities the market has to offer. As the former managing editor of multiple investment newsletters, he's covered virtually every sector of the market, ranging from energy and tech to gold and cannabis. Over the years, Sean has offered his followers the chance to score numerous triple-digit gains, and today he continues his mission to deliver followers the best chance to score big wins on Wall Street and beyond as an editor for Energy and Capital.