The age-old investment advice to maintain a diversified portfolio for stable returns is still the rule of thumb, according to David Kotok, chief investment officer at Cumberland Advisors.
"An investor has to think worldwide, and hold a variety of assets -- stocks, bonds, currencies and commodities -- from around the map," he says. "But you can also get great exposure efficiently by buying a few exchange-traded funds that represent the world's stock markets."
To own American equities, Kotok advocates SPDR S&P 500, the biggest ETF on the market. It tracks the price and performance of the S&P 500 and is up more than 5% this year. Capture the major economies of the world with iShares MSCI EAFE Index, which has also increased more than 4% this year.
But Kotok says the biggest piece of the pie -- about half -- should be emerging market stocks, though the iShares MSCI Emerging Markets Index, which has soared more than 12% year-to-date.
"The economy's recovery is in emerging markets, which should grow between 4% and 6% annually over the next few years, compared to mature economies, which will expand by about 2% annually at best," Kotok says. "But you never want to put all your eggs in on basket, or you might wind up with a dead chicken."
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