Markets are red-hot, and investors might be wondering what they can buy right now. The S & P 500 reached a record high in March despite corners of it already getting expensive, some pros believe. There could be more uncertainty, with some still expecting the U.S. Federal Reserve not to cut rates despite the central bank indicating it’s staying on track for three rate cuts this year. On top of that, some are calling for investors to move out of cash if rates do fall. If you had a spare $1 million to invest right now, what should you buy? CNBC Pro asked fund managers and wealth advisors how they would allocate their portfolios with that money. The 60/40 portfolio The 60/40 portfolio is a good starting point for many investors. Indeed, Aaron Benson, portfolio manager at investment bank Baird, says he uses the strategy for many of his clients’ portfolios. He would allocate roughly 60% into stocks this way: 15% each to U.S. large-cap growth stocks and U.S. large-cap value stocks; 4% to small-caps; and 8% to mid-caps. Another 15% would go to international developed as well as emerging markets equities. “We really believe in style diversification and feel that remaining diversified with value and growth stocks remains prudent,” Benson said. He stressed that because the small-cap market is “less efficient,” it’s more important to do active stock-picking and identify the best opportunities. “Small cap stocks based on price-to-earnings ratio are the cheapest they’ve been since really the tech bubble, relative to large-caps,” he said. “We see that more as a long-term opportunity.” With a million dollars to invest, it would be “reasonable” for investors to put their money in both small- and mid-cap stocks now, he said. Benson added that global stocks look “very cheap” right now, relative to their U.S. peers. “So we feel very comfortable including that as a portion of one’s allocation with with new capital to invest.” As for fixed income, Benson would allocate about 40% this way: 10% to short-term taxable fixed income; 25% to intermediate-term fixed income; and 3% to high-yield bonds. A final 5% would go toward real assets, which are “good diversifiers’ to stocks and bonds, he said. Examples he cited are real estate, infrastructure and commodities. Baird’s assets under management stand at more than $405 billion, while its private wealth management assets under management are over $275 billion. The size of the average client account is about $1.2 million. Chris Fasciano, senior portfolio manager at Commonwealth Financial Network, also believes that the 60/40 portfolio is “again a worthwhile asset allocation.” For the 60% allocated to stocks, he would focus on U.S. large-cap growth, value, small- and mid-cap stocks, as well as international equities. As for bonds, he likes intermediate-term fixed income. AI’s power needs, tech and health care If you’re an investor interested in focusing on tech and artificial intelligence, take a look at the allocation of Shams Afzal, managing director at Carnegie Investment Counsel. A good chunk of his model portfolio comprises allocations to tech and growth stocks, industrials such as power plays on AI, and semiconductors. “As AI went mainstream in 2023, it sent capital spending in cloud computing capacity and data center storage into overdrive. Valuations in the sector leave little room for error and multi-year growth is almost a foregone conclusion in semiconductors, data centers and other verticals,” Afzal said. “This was clear in Nvidia’s recent earnings that showed 400% growth year over year in their data center business alone,” he said. As a result, he said, there is “urgency for grid modernization and future-proofing” of power needs driven by hyperscale computing. Afzal named one stock to play on AI’s power needs: Watsco . Overall, these are his allocations, as he named exchange-traded funds as a way to invest in such trends and more. This portfolio is for a timeframe of one year or so. When it comes to international stocks, Afzal likes Mexico as it’s a direct beneficiary of China’s dwindling foreign direct investments. He added that he’s bullish on India for three reasons: It “remains the go-to destination” for sourcing high-tech labor; is undergoing a digital transformation across industries; and is seeing “healthy” demand from its “sizeable” middle class. 100% to stocks for the ‘moderately aggressive’ Louis Navellier, chairman and founder of Navellier & Associates, would be 100% invested in stocks. He has a portfolio for the “moderately aggressive” investor, although he says much of the risk comes from small-cap stocks. Overall, he said, “The U.S. is somewhat of an oasis now, because obviously China looks like they’ve got a real problem.” While buying bonds could be a good idea now as yields are set to fall, U.S. investors get taxed more on bonds than on stocks, Navellier said. “I would rather have long term capital gains, which is taxed at a 20% rate, then bond interest tax at a 37% rate,” he added. This is a breakdown of the top 15 holdings in his portfolio. He’s very bullish on Nvidia and Super Micro Computer right now, saying their earnings are “growing fast” and Nvidia is still dominating the chips space. Here’s why he’s positive on Nvidia and Super Micro Computer. Navellier also has other global stocks in his portfolio, including Chinese electric vehicle maker Li Auto , Mexico’s Vista Energy , German automaker Volkswagen and Canadian gold producer Alamos Gold . The average amount of money that his clients invest is $1.3 million, and his firm manages over $1.2 billion.
Sumber: www.cnbc.com
