NEW YORK ( TheStreet) -- When an investor comes to me, I can tell where that person is in the Cycle of Disappointment.
First is the investor fresh from one of the big wire houses whose portfolios are full of well-known stocks that ran out of gas years ago.I'm thinking of stocks like Cisco ( CSCO) and Pfizer ( PFE) and Lilly ( LLY).
Maybe there are a lot of bonds in there, too. That potential client did everything right, but still the returns were all wrong. The S&P 500 was up nearly 30% over the past year. Old stocks and old theories don't work, and some of these investors are just barely ahead for 2013.
Second is the do-it-yourselfer. After seeing the guys in suits underperform the market, this investor figures "how hard could it be?" and starts laying his own money down.
There is a lot of trading for a lot of the wrong reasons. I see lots of imbalances, maybe too much money in one stock, and people who underestimate the time and energy it takes to keep an eye on the market.
When I talk with them we discuss how markets have sectors, and how we should look for good stocks inside of hot sectors. This year, pharmaceuticals and biotechs have been hot.
As I checked out a potential client's portfolio the other day, I saw a few pharmaceutical companies including Pfizer, Lilly and Merck (MRK). But are these the pharmas to hold in the future? Not really.
Last year was good to the pharmaceuticals. In fact, pharma is now my third-ranked sector in the market.
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