I shook my head in dismay the other day when General Motors (GM), at a price of $4, was downgraded to Sell by Deutsche Bank and to Underweight by Barclay’s Capital.  GM’s stock had been steadily eroding for a long time, from over $42 in October 2007, while the bear market was taking hold and the economy was rolling over. 

These opinion shifts are worthless at this point.  Where were these analysts over the last year?  Actually, Deutsche Bank had a Buy rating on GM until it was altered on February 25 at $24 to a Hold.  A Hold is a neutral rating, a hedge, and certainly misleading in this case.  Insiders know that a downgrade from Buy to Hold is a highly negative signal, as I point out in my book, Full of Bull, but most individual investors don’t know this code.  So on the surface Deutsche Bank was fooling you, communicating advice to hang onto the shares while they nosedived all the way to $4.

Citigroup’s investment ratings on GM were similarly misleading, moving from a Buy to a Hold late last May after the shares had already fallen to under $18, and finally capitulating in early October to a Sell, with the stock below $8.  These opinion changes were akin to making a forecast that the Titanic would sink after observing its bow end jutting straight up into the air, minutes away from total submergence.  Pathetic.  It didn’t take rocket science to realize that the auto industry would tank once oil prices skyrocketed, and consumer spending and the economy started showing signs of collapsing.

Wall Street is bad at stock picking and loathe to admit we are in a roaring bear market.  You can’t trust its advice.  The best analysts, as ranked in the October Institutional Investor (I.I.) magazine 2008 poll, offered some of the following recommendations over the last year:  A leader in covering brokers and asset managers recommended Bear Sterns in January at $77.  Eight weeks later it was selling at $2.  The No. 1-ranked insurance industry analyst reconfirmed his long-standing Buy opinion on AIG in August and retained his favorable view until the federal seizure at $3 a share in mid-September.  The top-rated analyst in consumer finance pounded the table enthusiastically endorsing Fannie Mae and Freddie Mac right up until their government takeover below $1 a share. 

Street analysts can’t pick stocks (as I emphasize in Full of Bull) because they’re not paid for that skill.  It’s like asking an NFL quarterback to make an open field tackle.  He’s not trained in that capability, it’s not his job.  In its poll published last month, I.I. magazine asked institutional investors, the main client audience for Street analysts, to rank the most important attributes that they desired in equity analysts.  At the top was industry knowledge; the lowest ranking priority was stock selection, at No. 12.  No wonder Street investment recommendations are so bad.  Stock picking is hardly in their job description.

Wall Street, with its eternal optimism, is more in a mode of recommending catching falling safes these days instead of helping you recognize risks and advising protection of capital.  My perspective is that it seems we may have lost control over the domestic economy.  The next big impact will be the bursting of the consumer credit bubble.  I believe this will lead to the worst decline in consumer spending since the Great Depression.  Restaurants, retail stores, airlines, auto manufacturers, almost any business that carries considerable debt or that depends heavily on discretionary spending, will be hard-pressed to survive.  This will be a long and deep recession.  Federal bailout loans are no antidote for the stocks of troubled companies; the shares can still collapse to virtually zero. 

So don’t listen to the Street.  Avoid risky strategies that involve buying stocks or you’ll get flattened.  This is a time to preserve your capital and see how low the economy and the stock market might go over the next 12 months.

Time to step back and look at the history of bear markets.  They sometimes last decades, 1901-1921, 1929-1949 and 1965-1982.  You can make a case that this one commenced in 2000, some eight and a half years ago.  The S&P 500 reached 1527 in March 2000 and plummeted 50% during the ensuing two years (a bear market within the longer-term bear market).  The subsequent five-year “bull market,” which gained back the entire previous drop, should be put in the context of the last eight years, March 2000-October 2008, during which the S&P 500 capitulated by 38% overall. 

The stock market today is where it was in mid-1997.  Investors purchasing stocks from 1997-2000 or from 2003-2007 are well under water.  My point is that you must think long-term and realize that the stock market moves in decade-long cycles.  Even the shorter bull and bear markets, within the longer cycles, last for years not months.

I’ve told you a zillion times that Wall Street won’t admit we’re in a bear market.  Just read my book, Full of Bull.  The Street thinks in terms of days or maybe months, certainly not in years or decades.  Base your investment strategy on the long-term trend and outlook.  It’s gloomy.  Take a year off from stock market investing, preserve your capital (my most important strategy in Full of Bull), don’t listen to the Street, collect some interest and maybe some secure dividends, and sleep at night.  You won’t miss a thing, except maybe some painful losses.

Market timing critics disagree with this approach.  They claim that the bulk of stock market gains occur in a few massive breakout sessions.  I argue that the same is true for most of a market decline:  It’s concentrated in just a handful of trading days.  If you are out of the market during a period when the stock market’s aggregate direction is sharply down, during a bear market, the odds are in your favor that you’ll avoid more big drops than upsurges.  While you’ll miss some of the biggest up sessions, you’ll be better off in aggregate by avoiding the sharpest down days.

You think stocks might be a bargain at this point?  Some brokers are making this claim.  Look at the long-term picture.  For over a hundred years the average 10-year PE ratio (stock prices divided by mean annual earnings during the prior 10 years) has been slightly over 16x.  In roaring bull markets such as the 1920s, 1960s and 1990s, it broke out above 20x.  In bear markets such as the 1930s and 1970s, it ranged below 10x.  Currently it stands at just under 16x, not particularly depressed compared with previous bear periods. 

As corporate profits tank during the next year or two, the annual 10-year earnings average will slide, making the PE that much higher than 16x.  The economy is in a free fall.  International trade has ground to a halt.  There are more bank and financial shoes to drop such as consumer credit card debt defaults.  Obama-nomics may push most of our taxes higher, such as on capital gains and dividends.  In my opinion there continues to be ample market downside potential yet ahead.  So don’t believe that stocks are especially cheap here.

Despite my adherence to long-term investment strategies, protection of capital is paramount.  That sometimes dictates reining in and limiting your investment portfolio exposure to major contraction.  It’s difficult to be a long-term investor if you lose too much of your capital in the meantime.

The S&P 500 is off 41% from its high of a year ago, but don’t think for a minute that we have seen the bottom.  Mere “average” bear markets last a year and a half and fall some 37%.  More serious ones, such as those in 1973-74 and 2000-02, experienced drops of 50%.  The current financial and economic debacle is the worst since the 1930s Depression, so this bear market could eventually plummet by far more than 50%.

Don’t let the recent bounce lull you into complacency.  There were a dozen interim 5% rallies during the 2000-02 bear market.  As mentioned in my October 9^th blog, I expect the stock market to settle down for a few weeks while the credit markets begin to show some sign of a pulse and merely erode gradually.  It’s the eye of the hurricane.  A return of brutal forces is still in store.  There are likely to be more mutual fund redemptions, hedge fund liquidation, margin calls and forced selling as the fourth quarter plays out.

The scariest aspect of the outlook is that no one really knows the extent or duration of this financial and economic devastation.  I respect the Barron’s comments of Jeremy Grantham, chairman of GMO:  “I hope that someone else gets it, because I don’t.  And I have no idea, really, how this will work out.  All I can conclude, by instinct and by reading the history books, is that it will be longer, harder and more complicated than we expect.”  He is one of the few true professionals who are telling the truth.

As I stress in my book, Full of Bull, Wall Street won’t tell you.  Wall Street and the media are trying to convince you that this is a fine opportunity for long-term holders to purchase quality stocks.  That would be like attempting to catch a falling safe, a good way to get flattened.  Another Barron’s columnist had it right: “You were not paid to be a contrarian on the Titanic.”

Alan Abelson in the same issue mentioned it is the “second mouse that gets the cheese.”  Wait.  Take six months or a year off from equity investing.  Review the bidding next summer.  No hurry.  If you must be invested in stocks, be sure they carry low PE multiples, that the E (earnings) are reliable, and that they pay handsome dividends.

Wall Street is eternally ebullient, always positive.  It won’t tell you to preserve your capital.  Street analysts are carrying wildly optimistic earnings estimates.  They are expecting the S&P 500 companies’ earnings to surge 40% in the fourth quarter and climb by an absurd 20% next year.  This is in the face of a halt in consumer spending, the busted credit bubble, rising unemployment, deflation and the expectation of widespread bankruptcies.  The recession will be long and deep, extending into 2010.

I noticed that the Goldman Sachs analysts, who had forecast a $200 per barrel peak oil price for  next year back when it traded around $140, and also predicted an average $148 price for next year, reduced their estimate to $123 on September 16^th, and last week slashed it to $86!  That’s a lot of help, their predictions just followed along after the fact.  Typical of the Street, just more proof of the fallibility of Street forecasts.  Big estimate cuts are coming.  Reality will set in during the next few weeks as third-quarter results are reported along with sobering corporate executive commentary.

Don’t look to the Street for help.  You’re on your own.  This is not the time to contemplate making money in the market or the return on your investment.  Now it’s all about return OF your investment.  It is a time to protect your capital.  There will be ample time later to posture your portfolio for a rising market.  Don’t lose more money during the next down leg.  Get market neutral.  Take a timeout.  Let the “experts,” the insiders, thrash around and lose money by trading in this market.  You know better.  Be patient.  And get ready; this bear market has legs.

 In my September 26^th blog, I stressed the reality of the ongoing bear market, now down a daunting 35 percent from the high a year ago.  During periods like last week, when the S&P 500 collapsed by 9 percent, and the further 8 percent drop in the first three days this week, it’s easy to realize the bearish market conditions.  Bear markets start at -20 percent and on average fall 37 percent over a year and a half span.  We’re already there this time around after only a year.  This one will be a lot worse in my view, longer and lower, probably two years in duration and perhaps a decline of 50 percent, similar to the dives of 1937-1938, 1973-1974, and 2000-2002.  Forget the credit market resuscitation attempt.  And the Fed rate reduction today.  And other such moves to revive the credit markets.  It’s the economy, stupid.  And nothing will prevent a serious, brutal recession.

In the last few weeks there have been several, panicky market plunges as reality sinks in.  I am expecting this scary stock price action to settle down a little in the next couple weeks.  There will probably be a market bounce back of perhaps 3-5 percent, maybe all in one day.  Don’t let that fool you.  It will be a selling opportunity.  Such recoveries are commonplace during bear markets.  There were a dozen interim 5 percent rallies during the 2000-2002 market crunch.  Stock market collapses try to disguise themselves to keep you enticed, and just hopeful enough to distract you from taking the proper capital preservation defensive measures.  I wish I had done that in 1971 when I first arrived on Wall Street.  The first stock I owned was Ramada Inns, 100 shares purchased for $35 a share.  At the end of the 1972-1974 bear market, the stock was trading at $5 a share, even though the company was still in business.  It was a bear market lesson—stocks go lower and stay there longer than you expect.

The dire outlook for the economy is becoming glaringly obvious.  I warned of the darkening economic outlook in my May 30^th blog.  Consumer spending is stopping.  Business is tanking and in many cases firms cannot obtain interim bank financing.  Diving home prices and mounting foreclosures are ongoing.  Watch how many retail stores, restaurants, and other businesses fail.  This means rising unemployment.  We are seeing the ghost of deflation looming, which hasn’t really occurred since the Great Depression.  Lower interest rates will not make any difference.  The same for tax breaks.  We are in the downward leg of the economic cycle.  This recession may be the worst the country has experienced since the 1930s.  There have been a lot of bubbles that have burst—capital spending, Internet, housing, and credit—so there will be a lot of damage before this train wreck is cleaned up.

Stock markets recover six months before the economy rebounds.  I believe the recession will last all next year but that the stock market will bottom out and start moving in an upward direction by around next summer.  Still, this is a long way away.  I pleaded with you to get bear-ed up in my July 3^rd blog.  I hope you were paying attention.  It’s still not too late.  Cash.  Quality bonds.  Gold.  Exchange traded -funds (ETFs) that short the market.  Dividend-paying stocks.

It’s no longer a matter of capital gains or appreciation.  It’s return OF investment, not return on investment.  In my book, Full of Bull, published a year ago, I stressed the most critical investment strategy as preservation of capital.  Now do you believe me?  Even though your portfolio has undoubtedly shrunk materially, you can still preserve what’s left. 

We have seen this movie before—the Internet and housing bubbles that have already burst.  Now we’re viewing the collapse of the debt-market bubble. 

 My career on Wall Street started in 1971, but I’ve been an investor since 1963.  It is my observation that when bubbles start to deflate it takes years to normalize and causes vast economic damage.  While the planned congressional action may prevent some bank and brokerage failures, and probably a lot of other smaller bankruptcies, it will not check a consumer spending drop, rising unemployment, falling corporate profits, deflation, a wave of home foreclosures and other catalysts for a deep, prolonged economic downturn.  So don’t think for a minute the bailout move represents a turning point, aside from preventing financial Armageddon.

Bear markets are famous for short upsurges.  These 3-5 percent upside recoveries in past bear markets lasted a matter of weeks.  This time, given the incredible volatility, they have been extending for only a day or two.  Last week, on Thursday-Friday the Dow Jones climbed 777 points, not a bad upshot, though it was surrounded by the 421-point plunge Wednesday and the following Monday’s nosedive of 450.  Despite the positive feints, the bear market continues.  Overall, the Dow has slid more than 450 points over the last couple of weeks.

As I mentioned in my September 17 blog, it’s never too late to be prepared.  I’m tired of boring you with my cautious portfolio guidance—cash, dividend-paying value stocks, ETFs that short the market or outright short positions, even gold.  The most important investment strategy I stress in my book, Full of Bull, is preserving capital.  Don’t consider bottom-fishing; it’s just another avenue to losing more money in this bear market.  Conserve, protect, hoard.

In reviewing your holdings, take the attitude that it doesn’t matter what your stock or investment has done up to now—still ahead from where you purchased it or under water.  This only matters with regard to taxes if you plan to sell.  The critical consideration is what you believe is in store for the stock going forward.  The only aspect you can control is making an investment decision now. 

It’s as if you just started.  Take a conservative stance on the market.  Assume it may decline by another 10-20 percent.  Will your holdings stand firm or at least drop less than the market?  If your investment is genuine, long-term and quality-laden, with the attributes I mentioned above, it’s OK to hold it.  But be ready to suffer some pain and anxiety.  The key is what you believe the value of your investment might be in two or three years.

Wall Street and the media are extremely short-term in their investment views, as I point out in Full of Bull.  Their recommendations and advice are trading-oriented.  Don’t be influenced by all this daily market chatter.  Do the right thing.  Make long-term investment decisions, not trading calls.  Don’t let the stock market gyrations impact your long-term strategy.  Hold steady and be calm during this storm.  If you are ready for it you will survive.  But stay abreast and be realistic.  The government isn’t going to bail you out as it’s doing for the financial firms.  You’re on your own, but if you approach this correctly you are likely to get through this bear market in better shape than the banks, brokers and all the other institutions that haven’t managed their own risk properly.

Back in early July I advised you to get “bear-ed up.”  You may have doubted we were in a bear market.  Then in late August I stressed “The Bear May Bite This Autumn.”  So here we are — Lehman has failed, Merrill has capitulated, AIG is owned by the government, and the stock market cracked over 500 points on Black Monday and 450 today.  So finally you understand this is really a bear market, the S&P now 25 percent below its high of last October. 

Bear markets on average extend one-and-a-half years and fall 37 percent.  Get ready.  This may not be average; it could be worse.  And don’t be falsely cheered by interim 5 percent rallies; there were a dozen of these during the 2000-2002 bear market. 

So what should you do now?  Probably nothing.  If anything, your strategy had better be deliberate, thoughtful and careful.  Do not react to all the breaking news.  Don’t panic.  Don’t listen to your stock broker; the Street is not focused on risk or preservation of capital.  Think like an investor, not a trader.  Any portfolio changes should be for the long-term.  Mull over your portfolio holdings.  Spend a weekend, take some walks, visit a Starbucks and contemplate. 

You can’t do a proper assessment with CNBC blaring in your face or your head buried in the Wall Street Journal.  On Sunday I was so distracted and consumed by what’s occurring in the market that I took a long walk to ponder.  Monday, with the Lehman and Merrill news and the market diving, I went on another long walk.  I try to think and review first, rather than pull the trigger and act.  It’s not too late to prepare for the second half of the bear market, like an NFL team making half-time adjustments.  Have at least 25 percent of your portfolio in cash equivalents.  Cash does not crash.  Own only modest PE multiple-value stocks that pay good dividends.  An exchange-traded fund (ETF) that shorts the broad market is a nice hedge.  Don’t even think about bottom-fishing.  This is not a time to buy; it’s a time to be cautious.  Conserve, protect, hoard.  

It’s all about preserving capital, the most important investment strategy that I lay out in my book, Full of Bull.  Don’t lose.  Avoid incurring whopping losses.  It’s all about how much you keep.  These are perilous, risky times, maybe the worst bear market since the early 1970s, when the Dow Jones dropped 50 percent.  Take a reasoned, sober approach and be positioned for the tumult.

Wall Street will never admit it’s a bear market.  I emphasize this point in my book, Full of Bull, with respect to the eternally favorable bias and systemic optimism inherent at brokerage firms.  Automobile dealers will never tell you to hold off on buying a new car and Wall Street, by the same token, can never be negative, because it’s trying to sell you something.  Moreover, the two most important clients of brokerage firms are institutions such as mutual funds that own huge stock positions and corporate executives who dole out investment banking business.  You can imagine their reaction to Sell recommendations.  Never look to the Street for advice on the stock market outlook; it’s not credible.

I mentioned last month the scenario “The Ballroom’s on Fire, but They’re Still Dancing in There,” and expressed my fear that after Labor Day the insiders would return from holiday and likely decide to stop dancing.  The Dow-Jones has fallen 2 percent during the last two weeks, but this may only be the beginning of a downward leg.  In the same few days there were cataclysms such as Lehman Brothers (LEH) diving 77 percent and Fannie Mae (FNM) and Washington Mutual (WM) both crashing 89 percent.  These are akin to the sobering Bear Sterns experience earlier this year.

Despite the caving market and above detonations, Wall Street continues to be in denial, blindly ignoring the dismal outlook.  For example, according to the Wall Street Journal, the majority of Street analysts still carried Buy ratings on both FNM and Freddie Mac (FRE) in mid-August.  I noticed a columnist in Forbes, who is a money manager, reemphasized her FNM and FRE recommendations in the latest issue, only days before their effective demise.

American International Group (AIG) has collapsed by some 75 percent this year and there are still several Buy recommendations around the Street.  The shares are trading below $15, yet the mean Street price target is $35.  I’ll wager that when the stock was near $60 back in January, you didn’t see any price objectives of $20!  Nor did you likely see any Sell ratings.  The Street and the media are forever attempting to catch falling safes.  It’s a ridiculously high-risk, absurd investment strategy that is counter to preservation of capital.

Brokerage firms are not helpful when it comes to stock recommendations.  This week, after it was glaringly evident Lehman Brothers was about to capitulate, and the stock cratered to around $7, the three biggest firms on the Street finally got around to downgrading their opinions.  The stock had been collapsing ever since it was in the $80’s last year.  As I stress in my book, Wall Street analysts are bad at stock picking.

You are on your own during this perilous, risky bear market.  Brokers will not help you protect your capital.  Don’t try to beat the bear market by buying stocks – you will just get eaten.  Avoid the bear.  Cash does not crash, and it pays dividends in the form of interest.  Street analysts and the media will not offer such counsel.  You must figure it out yourself.

This is the lost decade.  Since the end of 1999, stocks have declined 15 percent; including reinvested dividends, the total return is slightly ahead.  Motley Fool observed that from 1980-2005, while the S&P 500 surged from around 100 to 1250, dividend stocks out-gained non-dividend equities by more than 2.6 percentage points a year.

Dividends represent defensive protection, a dire necessity during this bear market.  Curiously, they somehow are being neglected in this market tumult when all the attention seems to be focused on bottom fishing, catching a falling safe, or finding the rare sectors that might escape the downdraft.

There is a tendency to neglect dividends during bull markets as in the 1990s.  Even then you forgo dividends at your own peril.  Astonishingly, dividend-paying stocks outperform non-payers, even in bull markets.

A study by Arnott and Assness shows a direct positive correlation between dividend payout ratios and earnings growth — the higher the payout, the faster the earnings pace.  From 1920-2006, as found by the Motley Fool Income Investor, some 41 percent of total stock market returns stemmed from dividends.  That’s a lot to leave on the table if you are focused only on growth stocks.

I practice what I preach.  Plains All American Pipeline (PAA) has a dividend yield of 7.5 percent.  During the last six months the stock has held firm.  Including the dividends, my overall return is more than 5 percent.  Diana Shipping (DSX) has a stellar yield of more than 12 percent.  Over the same span the shares have fallen 8 percent.  Adding back the dividend, the decline is just 3 percent, better than the overall stock market.

In my book, Full of Bull, I stress the importance of dividends as one of the five most critical keys to successful investing (the others being preservation of capital, owning only a modest number of stocks, focusing on value stocks and holding stocks long-term).  Lately, however, some firms such as banks and financials have been cutting their dividends, casting all dividends in a bad light.  You need to own stocks that have steady, reliable, solid earnings underpinning the dividends.

Don’t lose sight of the paramount importance of dividends.  They will help you protect your capital during this bear market.

I have been stressing for several months my view that we are in a serious bear market.  You may not have thought so a couple of weeks ago when the Dow surged 663 points in a two-day span.  Such upsurges are typical during bear markets.  But maybe you are a little more convinced of the bearish scenario after the 288-point plunge so far this week.

Don’t let the meandering pattern over the last five weeks, the S&P 500 trading in a -22 to -17 percent band, lead you to complacency.  Wall Street professionals are on vacation during August or easing back in the Hamptons.  Volume is light and the tough portfolio decisions by major institutional players await the return of the insiders after Labor Day.  That is when this market may plunge on the next downward leg.  I’m even more afraid of October, a traditionally sour period, when still weaker third-quarter earnings results will be surfacing.

Wall Street will never admit it’s a bear market.  I emphasize this point in my book, Full of Bull, with respect to the eternally favorable bias and systemic optimism inherent at brokerage firms.  Automobile dealers will never tell you to hold off on buying a new car and Wall Street, by the same token, can never be negative, because it’s trying to sell you something.  Moreover, the two most important clients of brokerage firms are institutions such as mutual funds that own huge stock positions and corporate executives who dole out investment banking business.  You can imagine their reaction to Sell recommendations.  Never look to the Street for advice on the stock market outlook; it’s not credible.

Some observers believe the plummeting price of oil is a positive stock market stimulus.  The price decline of oil and several other commodities, even including gold, represents the popping of a bubble.  Up until now a major concern has been inflation.  This is reversing quickly, and my fear is that we may be moving toward deflation – a considerably worse condition than inflation.  Housing prices, retail store goods, wages, corporate earnings and stock prices are trending down.  Deflation would deepen the economic recession.

I have addressed how to bear-proof your investment portfolio in prior blogs.  Cash does not crash.  High-yield value stocks don’t crack as badly as high PE multiple growth stocks.  Short positions are a fine hedge, especially exchange-traded funds (ETFs) that short the broad market (and rise in line or at twice the rate of any stock market decline).  It’s all about preserving capital, the most important investment strategy that I lay out in Full of Bull.  It’s all about how much you keep.

These are perilous, risky times.  This could end up being the worst bear market since the early 1970s, when the Dow-Jones dropped 50 percent.  A respected independent market strategist, Ray DeVoe Jr., in his latest report dusted off a headline from May 1969 when describing this market – “The Ballroom’s on Fire, but They’re Still Dancing in There.”  This could get ugly when the institutions return to work in September and decide to stop dancing.

I suggest owning no more than about a half-dozen stocks.  Too many breed ignorance.  Wall Street analysts typically cover 15-20 stocks.  They are full-time professionals with at least a few years of experience and are highly knowledgeable on these companies.  And yet they still have a mediocre record in terms of stock picking.  How can you, as an individual investor, spending a few hours each week, pay close attention to more than five or six companies?

I scan for news and announcements from the companies in my portfolio almost everyday.  There are conference calls each quarter.  Occasional research reports should be viewed.  And you should always be pondering the overall stock market and considering other potential names to own.  There just is not enough time to monitor more than a handful of stocks.

A survey by the universities of Michigan and Illinois agrees with me, finding that investors with only a handful of names outperformed more diversified portfolios.  Investors holding numerous stocks slightly lagged the markets.  It has to do with knowledge, familiarity and information.

At a luncheon presentation I made recently,  the moderator quizzed the audience of investors on the number of stocks they thought to be the optimal amount in a proper portfolio.  The average response was 25-30, the rationale centering on diversification and low risk.  My view is diversification is “de-worsification.”  Too many different equities start to resemble broad-based mutual funds and the overall stock market.

If you want to perform in line with the market, don’t own individual stocks.  You can have mediocre performance by using mutual funds.  But I think you can do a lot better.  Invest in the right sectors, in profitable companies with good cash flow, value stocks with ample dividend yield.  Hold them for several years.  They should represent a few different areas, not all in biotech, energy or healthcare, for example.  And perhaps one of your limited holdings is an exchange traded fund (ETF), itself representing many stocks within one sector.  You can obtain adequate diversification within the five or six equities in your portfolio.

Preservation of capital and risk are critically important.  I emphasize this in my book, Full of Bull.  But it doesn’t take 30 stocks to achieve low risk.  Your risk profile can be just as conservative, maybe even lower risk, with a half-dozen names than with several times this number.  And your focus on these companies will enhance the likelihood that they all are good investments.