To The Moon

We often hear the advice of "don't put your eggs in one basket" to diversify your portfolio, but very few really offer us strategies on how to diversify. This question may baffle many investors. Let’s talk about how to use $10000 to build our portfolio. 40%: use $4K to buy $(SPY)$ 50%-60%: use $5K-6K to buy three types of stocks: (1) 10%-15%: banks and travel (2) 25%-30%: high-tech stocks (FAAMNG) (3) 10%-15%pharmaceutical stocks The reasons are as follows. Ⅰ We chose $SPDR S&P 500 ETF Trust(SPY)$ because it tracks the S&P 500 index, which means represents the industries and companies relating to the overall US economy. In S&P 500, tech stocks account for 29%,and the other sectors are more evenly distributed. This distribution itself reduces risks and its movement is relatively stable. Why is the risk diversified? Because the high-growth stocks and solid stocks can hedge risks: when the economy is good, the high-tech stocks soar, while the traditional Utility companies such as water, electricity, and gas stocks are stable; when the economy is bad, the high-tech stocks fall, but those high-dividend traditional industry companies are not or less affected by the economic cycle, such as pharmaceutical stocks. SPY currently has an overall P/E ratio of around 19x. The P/E ratio is one of the most important indicators of how expensive a stock is, and there is almost no bubble with an average P/E ratio below 20. For reference, some tech stocks have P/E ratios ranging from tens to hundreds of times, and it is a safe bet to put your money in SPY with a P/E ratio of 19x. Ⅱ In the other 50%-60% of your portfolio, pick stocks from these three categories of companies. (1)10%-15%: banks and travel In fact, this category is about the same risk as the S&P 500, which are low-risk value stocks. For example, JPMorgan Chase, the largest bank, P/E ratio less than 10. (2) 25%-30%: high-tech stocks (FAAMNG) $Meta Platforms, Inc.(FB)$ Facebook has returned 11 times in 9 years from takeoff to its current share price of $200, averaging about 30% annual return. Facebook's current P/E ratio is only 15x, which is less than average. $Apple(AAPL)$ Apple shares are currently trading at around $170. Apple's current P/E ratio is 28x. $Microsoft(MSFT)$ Microsoft has a solid base and continues to build wealth for shareholders. The meta-universe plan is an even greater opportunity for future earnings. Microsoft is currently trading at a P/E ratio of 32x. (3) 10%-15%pharmaceutical stocks As mentioned earlier, this is a good hedgechoiceagainst cyclical stocks. $Biomarin Pharmaceutical(BMRN)$ Among the cutting-edge gene therapy companies, this company is the first to use protein replacement therapy to fix genetic defects. Financially it will turn around this year 2022, which is a big positive factor. $Eli Lilly and(LLY)$ This Company, one of the giants in the drug business, has lower risk and can hedge against the high-growth company. For example, in the current downward trend of the market, $Eli Lilly and(LLY)$ is instead continuing to rise. Conclusion So a competent financial manager needs to have a clear allocation for a stock portfolio, rather than picking one stock and putting all the money in it. Such an allocation reflects our investment philosophy: risk control and a preference for high-tech sectors. The most important thing is that each investor has to have his own investment philosophy and stick to it. In this way, they can hold on to it whether we experience a bull or bear market.