By J. Royden Ward, Editor of Cabot Benjamin Graham Value Letter
From Cabot Wealth Advisory 6/28/10 Sign up for free Cabot Wealth Advisory

Investing in the stock market can be overwhelming or downright scary. The choices are endless, and a step in the wrong direction can result in steep losses, even for experienced investors.

Nevertheless, you shouldn’t put off investing until you think the “time is right.” Now is the best time to start. Procrastinating will not help you reach your goals. If you set reasonable goals, you can reach them, and we can help! At Cabot, one of our best features is that our editors conduct all of their own research, write all of their Cabot letters, and answer all emails from our subscribers. It’s a lot of work, but it’s worth it because our subscribers love us and stay with us!

Here are some tips for successful investing.

Minimum Investment:  There are no rules when it comes to minimum amounts to invest in stocks, bonds, exchange-traded funds (ETFs) or mutual funds. Investing in stocks and bonds allows you to tailor-make your portfolio to meet your objectives.  ETFs and mutual funds provide diversification without investing in a lot of individual securities.

Core Holdings:  If you are starting to invest now, I strongly recommend investing in a group of “core” or primary holdings to start. Your core holdings should include leading companies in several different industries. Your companies should boast strong balance sheets with low debt and lots of cash.  They should also have a long history of steadily growing sales, earnings, and dividends. In short, your primary holdings should be made up of companies that have been around for a long time and will continue to be around despite various crises lurking around the next corner.

Once you have established the core of your portfolio, you can then add other companies to help diversify your portfolio further and to tailor your portfolio to meet your objectives.

Objectives:  I recently attended my daughter’s graduation from Dartmouth College. She is now ready to embark on what will hopefully be a very successful career. My advice to her about investing is a lot different than my advice to many of my subscribers who are retired. My daughter can invest aggressively, because she has several decades to create wealth. Retirees need to preserve their nest-egg, so they need to invest more conservatively.

Diversification:  I am a strong proponent of diversification. If you invest in only a few stocks, then one bad stock can ruin your day and jeopardize your gains. I recommend investing in a minimum of 12 stocks. Twenty stocks are even better, if you have the time to adequately keep up to date on each and every stock.

Allocation:  Not only should you invest in several industry sectors, your holdings should also be diversified in several other categories, such as: size, risk, U.S. or foreign and type including defensive, value, growth, cyclical and speculative.  I maintain allocation objectives to make sure I do not become over-weighted in any one category.

Editor's Note: Warren Buffett is the world’s third richest person, and the world’s richest investor. And he got that way by practicing an ultra-safe investing method he learned from Benjamin Graham, the father of value investing. Cabot Benjamin Graham Value Letter Editor J. Royden Ward employs that method to bring you the best undervalued stocks in the market. Check out some of Roy's 2009 double-digit winners: Raytheon (RTN): up 35.4%; Cintas (CTAS): up 31.6%; Watts Water Technologies (WTS): up 40%; Regal-Beloit (RBC): up 25% … and more! Learn the secrets of this method today: Cabot Benjamin Graham Value Letter.

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