Developing a diversified portfolio is essential for everyday investors. That is, for those of us who'd rather be doing other things than staring at a computer screen analysing financial statements and creating spreadsheets.
Many seasoned investors suggest, as a rule of thumb, holding at least 15 companies in a stock portfolio. However, personally, I'd rather hold five great companies than 15 which I don't know much about.
Holding a number of blue-chips, medium-sized companies and maybe even the occasional small-cap, is a good way to get started. Remember, there's no get-rich-quick schemes in the stock market.
Money invested in stocks, should not be needed for at least five to seven years because markets do crash and even great companies can get thrown out with the bath water. To smooth out these falls, aim to invest for the long term.
5 stocks for your long-term balanced portfolio
1. Coca-Cola Amatil Ltd (ASX: CCL) is the distributor of Coca-Cola and Beam branded products to Australia, New Zealand and four neighbouring countries. It should be considered a 'core' stock in your portfolio.
2. BHP Billiton Limited (ASX: BHP) is the world's largest diversified mining company. With falling debt, hints of increased shareholder returns and a key focus on four commodities (copper, iron ore, coal and petroleum), BHP presents as a viable long-term investment opportunity.
3. Computershare Limited (ASX: CPU) provides share registration services for around 16,000 companies worldwide. It connects companies to their valued shareholders and enjoys a huge amount of recurring revenue.
4. Shine Corporate Ltd (ASX: SHJ) is a $470 million Australian law firm which is expanding throughout the country (organically and acquisitively) and into new areas of litigation which it calls 'emerging practice areas'. These services are growing well and now account for 15% of Shine's revenue.
5. Yellow Brick Road Holdings Ltd (ASX: YBR) is a junior wealth management firm focused on providing full service financial advice and products for its clients. Although currently it is not profitable, it's rapidly making inroads to becoming so.
Our #1 stock pick for 2015 – Yours FREE!
Investing in the stock market is best done over the long term by finding quality undervalued companies which can achieve sustainable growth for many years. I think each of these five companies exhibit these characteristics and could produce market-beating returns, over time (I'd like to hope so, I own four of them in my own portfolio!)…
