In the history of the stock market, “equal allocation” produces superior results as compared to portfolios that are “weighted” by market cap. What does this mean? Simply put, distribute your investments equally across various types of businesses in the stock market, and you’ll have a better chance of higher returns.
Here are the 11 sectors in the stock market:
- Basic Materials
- Communication services
- Consumer discretionary
- Consumer staples
- Information technology
- Real estate
[ Cash is the hidden, “12th Sector”! Keep some of it around ]
Each of these sectors represent a different type of business, and as you can see by the numbers, delivers various levels of returns. External events affect each of these business types differently. And since we have no reliable crystal ball, we can’t predict the future and know where to concentrate our investments to avoid loss. The best we can do is spread our investments out over the various sectors so as to reduce the risk and impact if one sector should drop, such as oil.
In equal allocation, you would invest an equal amount of money in each sector. For example, if you have $22,000, you would allocate $2,000 per sector, since there are eleven (11) sectors in the stock market. Take that $2,000 per sector and put $1,000 each in two stocks. And then you would have an equal allocation portfolio that is diversified, protects you from risk of loss from being over invested in any one sector, r invest $1,000 in two stocks in each sector, for $22,000 starter portfolio that would have “equal allocation” to each sector, in this case, a you’ve allocated $2,000 per sector, or $22,000 total.
Our Equal Allocation model portfolio features stocks that are “Qualified” by the Dividend System™. This means we have populated this portfolio with stocks that rank highest in our quality criteria of low debt, low beta, low payout ratio, high reliability, growth in cash flow, dividends, book value, and even an Altman-Z score in the healthy range.
This portfolio is for those seeking growth and dividends, as we are the Dividend System™ after all! Tracking of the portfolio began on 2020-05-22.
(Sometimes the data doesn’t fully update (beyond our control.) To see the original Google Sheet, just click here.)
The stocks included meet our minimum requirements that help to reduce the downside and protect against lost of capital, such as keeping debt/equity and payout ratios low, beta low, and at least 5 years of continuously increasing dividends.
Share your comments and ideas!
Sharing your questions and comments is the best way to learn about dividend investing. The Dividend System™️ welcomes your respectful thoughts about the portfolio, critiques, comments, and alternative ideas.
These portfolios are samples, are not appropriate for all investors, and are presented for information purposes. Prior to making an investment, you need to do your own research, as you alone are responsible for your money, investment decisions, and the results therefrom.
* The often forgotten “12th Sector” is cash–keep some of that on hand!