Having a well balanced portfolio is essential for longevity in the stock market. Holding a percentage of your funds in cash or fixed interest, as well as a diverse group of stocks is advisable for almost all investors.
Building a solid foundation around defensive companies is a great way to start any portfolio and four blue-chips with excellent defensive characteristics are Telstra Corporation Ltd (ASX: TLS), Coca-Cola Amatil Ltd (ASX: CCL) and Computershare Limited (ASX: CPU). However, it's still vital you pay the right price – giving yourself a margin of safety as wide as possible – otherwise you could expose your portfolio to more risk than is otherwise necessary.
For example, Telstra will likely grow into a bigger and more geographically diverse company in the years ahead. Its ongoing dominance in a number of domestic markets (such as mobiles) will enable it to continue investing in growth areas such as its International and Network Application Services division. However, at current prices, Telstra appears fully valued and best left on the watchlist.
Shares in Coca-Cola Amatil have been hit hard in 2014, down 25% so far. However a falling Australian dollar and structural review by newly installed CEO Alison Watkins could provide some much needed relief for shareholders. I remain cautiously optimistic about the company's ability to deliver market-beating returns, but I know turning the $7 billion company around won't be easy and it won't happen quickly.
Lastly, Computershare is the name behind shareholder services for both individuals and companies, with exposure to around 20 countries. Computershare may not offer a huge dividend yield at current prices but will benefit from a lower Australian dollar and the inevitable rise of interest rates. I believe it is well priced for long-term investors (10 years or more), but I'd wade into the stock by buying small parcels at a time.
Here comes the growth!
