Bull rocket fueling up with $2 trillion

Bull rocket fueling up with $2 trillion
Turn the engines on with a five-star portfolio

LOS ANGELES (CBS.MW) - The MIR station crashing to Earth. A perfect media image for the 2001 market, as the S&P 500 experienced its worst first-quarter performance in its 44-year history -- vaporizing $1.8 trillion.

And in the space of a year, Nasdaq's technology payload triggered a flameout of our worldwide space adventure, with a total wipeout of $4.5 trillion net worth.

Now switch channels to a launch pad at Florida's Kennedy Space Center.

Imagine $2 trillion of cash building up like rocket fuel. Being loaded into a hissing, steaming, vibrating Titan missile. You got it - there's $2,000,000,000,000 being stock-piled in money market funds as investors sit nervously waiting for the next launch, waiting to catapult the S&P 500 and the Nasdaq back up into a bull orbit.

A huge pay-load of fuel

But there's also a heart-pounding fear rippling through the spectators in the bleachers - how do you pick "the bottom?" Will the next satellite launch in the next quarter? Or be delayed until 2002? More frightening, if we haven't hit bottom, how much deeper? Nobody knows. But we do know lots more fuel will be stockpiled! And that's my point. We could end up with $2.5 to $3 trillion in money market cash before we have lift-off!

Get the picture? A new image. Stop focusing on the crash of the MIR. Think positive. Look ahead. Plan. Something's building to ignition. And it will trigger. The longer we wait, the more fuel, and the bigger the explosion. True, bears fear an implosion. History suggests otherwise. Bulls always come roaring back.

Aiming for the stars

History also shows that most investors invariably miss a next launch. The majority of America's investors, including pros, typically misjudge market turning points and take-offs. Like now, most are so nervous and gun-shy from the relentless descent of the past year they'll remain spectators in the stands, clutching their cash, passively watching the next bull lift off.

How about you? Getting an itchy trigger finger? You should be. Let's say you're a typical long-term investor. If you are, here are my picks for a model five-star "lift-off" portfolio. Winners that'll work for dollar-cost averaging in a bear market or for positioning your thinking when your nerve returns, when you decide the bull's ready to move, when you want to move out of cash into the market fast with an aggressive growth portfolio.

Top-gun funds, so good you can fill a portfolio by throwing darts at the list:

Large-cap stock funds (60%)

Here are your core funds. Sixty percent of any long-term portfolio is made up of funds investing in America's blue-chip giants. And every respectable fund family has one or more solid large-cap stock funds to pick from. One fund will work, but I find most investors feel more comfortable diversifying with a few of these winners, mixing value, growth and blend:

Fidelity Dividend Growth (FDGRX:73.49, -2.21, -2.9%) is an $12 billion value stock giant also averaging over 20 percent the past 5 years.

For a basic indexing portfolio, stick with funds tracking the S&P 500 and the Wilshire 5000, funds like Vanguard 500 Index
(VFINX:122.89, -3.41, -2.7%) and Vanguard Total Stock Market
(VTSMX:32.19, -0.89, -2.7%) are solid broad market funds. And if you
lean one way or the other, try Vanguard Growth Index
(VIGRX:30.16, -0.79, -2.5%) or Vanguard Value Index
(VIVAX:23.69, -0.68, -2.8%) .

You should also check out some five-star large-caps with small-tier families. Try Harbor Capital Appreciation (HACAX:33.35, -0.59, -1.7%) , Selected American Shares (SLASX:44.30, -1.36, -3.0%) , Gabelli
Growth (GABGX: 31.93, -0.83, -2.5%) , Excelsior Value & Restructuring (UMBIX:54.06, -2.02, -3.6%) , White Oak Growth Stock
(WOGSX:31.71, -0.97, -3.0%) , and Legg Mason Value Primary
(LMVTX:52.75, -1.92, -3.5%) .

And several of the other key families have super-charged 4-star blue-chip funds that work in a five-starportfolio: T.Rowe Price Blue Chip Growth
(TRBCX:35.33, -0.94, -2.6%) , Janus Growth & Income
(JAGIX: 33.54, -0.77, -2.2%) , Invesco Equity-Income
(FIIIX:8.76, -0.23, -2.6%) , Dreyfus Disciplined Stock
(DDSTX: 31.07, -0.85, -2.7%) , and the American Funds New
Perspectives (ANWPX:31.71, -0.78, -2.4%) .

If you're a real aggressive long-term investor, swap 10-15 percent of your large-cap asset allocation into sector funds in technology and biotech. Keep in mind, however, that about 25 percent of the S&P 500 is already made up of technology companies. Some of the best five-star tech funds are Firsthand Technology (TVFQX:36.33, -0.66, -1.8%) , Invesco Technology
25.71, -0.68, -2.6%)
, Fidelity Select Brokerage Services
59.56, -1.31, -2.1%)
, and Vanguard Health Care
131.54, -1.91, -1.4%)
. Consider shifting five percent of your large-cap stock fund allocation into two or three.

Small- & mid-cap stock funds (25%)

Liberty Acorn (ACRNX: 26.97, -0.67, -2.4%) is a small-cap no-load managing $3.6 billion in assets and averaging 20 percent the past decade. Some other high performing five-star comparables include Third Avenue Value
9.98, -0.30, -2.9%) . Then mix in a mid-cap winner like Artisan Mid-Cap (ARTMX: 27.50, -0.73, -2.6%) , Weitz Value
28.78, -0.78, -2.6%)
, Strong Opportunity
34.31, -0.86, -2.4%)
, and Oakmark Select
23.44, -0.75, -3.1%)

International stock funds (10%)

One of the top performers with overseas investing is Tweedy, Browne Global Value (TBGVX:
Tweedy Browne:Gl Value
Last: 27.28-0.35-1.27%
6:16pm 02/29/2008
Delayed quote data
Sponsored by:
27.28, -0.35, -1.3%)
which manages $3.5 billion and averaged 17 percent for the past five years. Comparable five-star funds include Artisan International (ARTIX: 26.62, -0.71, -2.6%) , Fidelity Diversified International
(FDIVX:36.53, -0.89, -2.4%) , American Century International Growth
(TWIEX: 12.64, -0.29, -2.2%) , and Citizens Global Equity
(WAGEX: 21.01, -0.48, -2.2%) .

Fixed-income funds (5%)
Keep your money markets at a minimum. Instead, load up with ultra-short, intermediate and tax-free bond funds with minimal risk of capital, like Strong Advantage (STADX:8.89, +0.01, +0.1%) , Schwab YieldPlus Investor
8.79, -0.04, -0.4%)
, or Vanguard Short-Term Bond Index
10.36, +0.05, +0.5%)
. And if you prefer municipals, go with SIT Tax-
Free Income (SNTIX:9.01, -0.06, -0.7%) and Vanguard Intermediate Term Tax-Exempt (VWITX:12.83, -0.07, -0.5%) .

3 ... 2 ... 1 ... we have a lift-off!

Keep one eye focused on each channel - along with the continuing losses in the Dow, Nasdaq, economy, earnings estimates, interest dates, and spy planes, we also have a continuing buildup of money market cash, the rocket fuel being stockpiled for the next launch of the bull market. We don't know when. Or how much further down. Only that it will happen. And that the lift-off will probably catch most investors in the bleachers as spectators.

Remember, a solid five-star portfolio only needs eight to10 funds for a bull or bear market. With these 38 funds to pick from, you can probably pick the right ones for you by throwing darts at the list - so have some fun, use darts that look like NASA Titan rockets!

Paul B. Farrell, author of "The Winning Portfolio" and three books on online investing, has been executive vice president of the Financial News Network and an investment banker with Morgan Stanley. He holds a doctorate in psychology and a law degree.

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