Booming Markets and Bonds

As the markets climbed to record highs today, I enjoyed pretty nice gains on my portfolio as we head into the holidays. Since I began investing in August I have enjoyed some pretty significant growth in a short period of time. Overall my portfolio is up about 7% as I continue to put a portion of my paycheck each month into the market. My biggest gains have been on Apple (AAPL) and 3D Systems (DDD), which have been up 19.09% and 18.67% respectively. In addition I have made 6.7% on my Ebay (EBAY) position in only 10 days and another 9% on Silicom (SILC) in only 6 days! Everything is going great!

But wait a second, didn’t mom always tell you if something sounds too good to be true than it probably is? As the stock markets soar higher and higher, there is speculation that we are due for a downturn eventually. Whether that is in a few days or months or a year from now, nobody knows. Sure experts and analysts can pretend to predict when the economy is going to boom or bust, but ultimately no one ever really knows how the market is going to behave.

Due to this uncertainty, I am going to diversify my portfolio more over the next few weeks in the event the market does eventually drop. Following Benjamin Grahams recommendations for investors, I will invest at least 25% of my portfolio in bonds. By investing in bonds I can help hedge some of the risk that comes with the stock market. If the markets drop, I won’t experience a big of losses as a result. If the markets continue to expand, I will miss out on some of those huge gains, but a least I can sleep a little easier at night knowing that not all of my investments rely on the stock market.

My plan is to research some Bond ETFs and figure out which ones I think are best for me. Many of the ETFs have dropped quite a bit in the past year, and I believe I can get some real bargains by investing now. I will chronicle my research on Bond ETFs and post about them here and hopefully I can help you diversify your portfolio as well!

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