This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Let the S&P 500 Guide Your Stock Picks

SAN FRANCISCO ( TheStreet) -- With the Dow dropping below 10,000 earlier this month, investors are experiencing that all-too-familiar sinking feeling in the pits of their stomachs again. Should they give in to recessionary flashbacks and make changes to their investment portfolios?

Brad Sorensen, sector analyst for Charles Schwab's (SCHW - Get Report) Center for Investment Research, sees the 10,000 yardstick as mostly psychological. Still, it's a wise to reconsider your portfolio's asset allocation.

With the stocks down this year, investors are trying to shore up their 401(k)s and other retirement accounts. Before you shift your portfolio to cash, consider taking a simpler approach by aligning your equity investments with the S&P 500 Index, Sorensen says.

"The rally that we've seen since March 2009 was probably a little overdone and due for a bit of a pullback," he says. "I didn't see any real panic or panic selling, but what it did do was to again remind investors that it's important to check on your portfolio and rebalance occasionally."

Sorensen recommends that you consider not just the broad allocation of your assets, but the granular details of the funds that constitute the stock portion, adjusting your strategy sector-by-sector. Investors often overlook the industry breakdowns in their portfolios, which can be detrimental to long-term results, he says.

In a recent advisory to Schwab customers, Sorensen urged them to analyze their allocations to 10 sectors (consumer staples, financials, energy, health care, industrials, information technology, materials, telecommunications, utilities and consumer discretionary) and adjust the ratios so that they follow the model of the S&P 500. For example, investors should have 15% of their equity holdings in financial companies because that's the industry's weighting in the benchmark.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
SCHW $34.70 0.00%
AAPL $118.44 0.00%
FB $94.14 0.00%
GOOG $631.21 0.00%
TSLA $259.99 0.00%

Markets

Chart of I:DJI
DOW 17,598.20 -91.66 -0.52%
S&P 500 2,098.04 -5.80 -0.28%
NASDAQ 5,115.3820 -12.8990 -0.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs