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Building Your Stock Portfolio with Core Investments

Not Value and Not Growth


Investors in the stock market need to anchor their portfolios with top-notch investments that will stand the test of time.

Core stocks represent the foundation upon which you can build a portfolio for the long-term. These stocks may rightly be called "blue chips" and represent leaders of industry and commerce.

They are not rightly classified as growth or value stocks, since they usually don't share the major characteristics of either group. What they do share in common is the strength and size to meet most economic and financial challenges.

While they can come from any industry, core stocks have some common characteristics.

Large companies

Core stocks are found at the high-end of market capitalizations. In other words, they are stocks of large companies.

While there are many fine mid and small companies, large companies have a better chance weathering the challenges of a slow or declining economy.

You can begin your search for the core stocks that are right for you with the components of the Dow and the top companies listed in the S&P 500 Index.

A large company does not become a core stock just because of its size - the market is littered with companies that expanded like a giant balloon only to meet disaster.

Not bargains

Core stocks typically trade close to or above their intrinsic value, since they are sought after by institutional investors as well as individual investors.

This means it is unlikely you will find a core stock trading in the value range.

One of the tenets unsuccessful long-term investing is buying great companies below their intrinsic value so there is plenty of room for growth and profit.

That might not be the case with core stocks because they are so popular. However that does not mean they shouldn't be a part of your portfolio.

It simply means you will need to be careful about when you buy, but don't expect to find them on sale in the bargain basement. Are you equally will will will and in and

The stock should definitely for a long-term strategy and if you choose correctly they will build wealth for you over time.

Not high-growth, but strong dividends

While core stocks do grow, don't expect the rapid burst of growth that you might see in smaller growth stocks.

One of the key characteristics of core stocks is consistent profits and a track record of growing revenue and earnings even during challenging financial times.

Another characteristic of core stocks is a pay a consistent and reasonable dividend that will help you earn a good return over time.

The consistent dividend is important in adding to the long-term growth. Many investors choose to reinvest their dividends to buy additional shares of the stock.

The management of core stocks

When times get tough great companies make decisions that will let them weather the current challenges but do not take actions that will rob them of future growth.

Strong financial statements make it possible to invest in the future, whether that is through research and development or acquisition.

Not automatically core

Not all large companies have core stocks, so be careful when you're looking for a core stock to build a foundation under your portfolio.

While core stocks may be among the safest equity investments you can make, that doesn't mean you can completely take your eyes off them.

The last thing you want is for the foundation of any structure to become compromised so review your core stocks at least annually and more frequently during challenging economic times to confirm that they should remain part of your core investment strategy.

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