If Big Stocks Let You Down, Think Small
BOSTON (TheStreet) -- For a very long time, many retirement portfolios have focused on big, well-known companies such as GE (GE) and IBM (IBM). Owning big blue-chip stocks has been seen as safe and profitable.
But in the topsy-turvy marketplace of recent years, this conventional wisdom doesn't always ring true. Some less prestigious companies and small-cap stocks can also boost returns, hedge against inflation and build the savings needed for longer lives.
|Google is a great company but a lousy investment, some say.|
"Some of America's biggest and most well-known companies are hurting lots of portfolios," says Bill Gunderson, president of Gunderson Capital Management and host of a daily radio show on KCEO-AM in Oceanside, Calif. "Not only do they drag your portfolio down -- many of them have gone backwards for years.""There are stocks of yesteryear, and there are stocks for today," he says. "Take Cisco (CSCO), for example. Over the last 10 years it has gone nowhere; over the past three years it has given negative returns. It became a stock of yesteryear five or six years ago." Other "stocks of yesteryear," in his opinion, are Google (GOOG), Pfizer (PFE), Microsoft (MSFT) and Intel (INTC). "Great companies all, but lousy as investments," Gunderson says. Many investors look at these recognizable names as though "there is a warm blanket being wrapped around them," he says, but favorable associations are not enough; one has to dig into their actual track record. Many mutual funds, a core holding of 401(k) plans, tend to load up on such companies, which can be bad news for those saving for retirement, Gunderson says. "General Electric is probably one of the most widely held, well known stocks in the world," he says. "If you look at GE over the last 10 years, it is down about 60% during that period of time. On the other hand, during that same time, you have a stock like Priceline (PCLN) that is up 600%." Instead of riding on the past glory of Microsoft, Gunderson prefers up-and-coming companies such as AutoZone (AZO) and Dollar Tree (DLTR) to build returns and provide diversification.
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