How much diversification is too much?
What would you suggest if you came across a prospect whose portfolio consisted of: 46 common stocks, 31 mutual funds, 1 exchange-traded fund, and 1 REIT...with a market value of $5 million?
In fact, this is the portfolio of Supreme Court nominee John Roberts...or it was as of 12/31/03...when he last filed his annual disclosure forms. As Henry Blodget reports in an article in Slate, "How to Invest Like a Supreme Court Justice", John Roberts has accumulated a nice investment portfolio for himself over the years. As of 12/31/05, his equity portfolio was worth somewhere between $3-7 million dollars. With the indices up 15-20% since then, his holdings are likely to have improved commensurate with the markets. He also had good liquidity...with his bank accounts holding between $1-2 million in cash.
His individual holdings betray an affinity for solid, "blue-chip" names, e.g. Citigroup, Coca Cola, Intel, Merck, Microsoft, Pfizer, Proctor & Gamble, and Schlumberger. Fund names include: American Century, Davis, Fidelity (7 Fidelity funds), Franklin Mutual, GAM, Janus, Merrill Lynch, Lord Abbett, Putnam, Seligman, T.Rowe Price, and Vanguard.
Not that his portfolio is completely conservative and boring...he does own XM Satellite Radio. Interestingly enough, he appears to own no bonds or bond funds.
So...if you came across John Roberts through a referral or a cold call (Judge Roberts? Hi...I wonder if you are aware of the benefits of tax-free municipal bonds?)...what would you say to him? Considering his other personal data...married, two young children, 50 years-old, a Supreme Court justice salary of less than $200,000 (The Chief Justice makes $202,900, and the Associate Justices make $194,200)...what would you suggest?
Excuse me...I am putting the proverbial cart before the horse. Given everything that you know about John Roberts' personal and financial circumstance, what questions would you ASK him that would provide a clearer picture of his needs/concerns?
That's all for now. Have a great weekend! Ciao.
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