15,902 Stock Picks for 2017.
Tis the season for Wall Street and financial magazines to identify their best stock picks for 2017. In a few weeks, we’ll start to see several publications, web sites and blog posts highlight their best selections for the coming year. I want to add my name to the list of people making bold stock selections for 2017 so I have selected 15,902 companies. I’m hopeful a few of these companies will turn out to be big winners.
What was my screening process? How did I select these top stocks? I selected six diversified mutual funds from Dimensional Fund Advisors. These six stock funds own 15,902 companies. Here are the six funds:
· DFA Core Equity - DFEOX
· DFA Micro Cap - DFSCX
· DFA Small Cap - DFSTX
· DFA Real Estate - DFREX
· DFA International Core - DFIEX
· DFA Emerging Markets - DFCEX
An equal weighted portfolio of these six funds, rebalanced annually, generated the following returns.
1. One-year return of 8.9%. A $60,000 investment is now worth $65,300
2. Three-year average annual return of 5.4%. A $60,000 investment is now worth $70,300.
3. Five-year average annual turn of 11.2%. A $60,000 investment is now worth $102,500.
4. Ten-year average annual return of 5.9%. A $60,000 investment is now worth $106,000.
In addition to getting access to thousands of companies, your low-cost portfolio covers the world. 75% of your holdings are in the United States while 25% will be held internationally.
Rather than picking the best five or six stocks for 2017 focus your energy on identifying your top five or six financial goals. Is this your year to open an IRA account or reduce debt? How about creating an emergency fund or establishing a budget? Buying a second home or funding an education account? The benefits of spending time getting your financial house in order will outweigh buying five or six hot stocks.
Another suggestion is to increase your financial knowledge so you can become a more informed investor. Here a few investment classics you can add to your Christmas list.
· The Only Investment Guide You’ll Ever Need – Andrew Tobias.
· Bogle on Mutual Funds – John C. Bogle
· Beating the Street – Peter Lynch
· A Random Walk Down Wall Street – Burton G. Malkiel
· Where are the Customers’ Yachts? – Fred Schwed, Jr.
· The Most Important Thing Illuminated – Howard Marks
· Stocks for the Long Run – Jeremy J. Siegel
As we roll into the new year keep your eye towards the long term. Asset allocation, diversification and low fees win in the end.
Well, I think the secret is if you have a lot of stocks, some will do mediocre, some will do okay, and if one of two of 'em go up big time, you produce a fabulous result. And I think that's the promise to some people. ~ Peter Lynch.
Bill Parrott is President and CEO of Parrott Wealth Management. www.parrottwealth.com.
Note: Investment returns were generated from Morningstar’s Hypothetical tool. Past returns are not a guarantee of future performance. Your actual return may be higher or lower than those posted in this report.
December 2, 2016