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February, 2007


A carefully selected growth and income fund or portfolio, held for the long-term (3-5 years or more) tends to have lower volatility (one measure of risk) and higher annual total return (price performance plus yield) than the major market averages. There are exceptions, as when growth assets with little or no dividend, and often little or no earnings as well, did terrifically well for the five year period beginning about 1995. However, growth plus income investors during that period were probably glad to see their much lower losses when the bottom fell out of the tech stock and dot com bubble in early 2000, resulting often in declines of 90% or more.

Lately, a new concern is how reliable the US dollar will be. Some forecasters suggest that for a variety of reasons it may drop substantially in value relative to European or Japanese currencies over the next few years. I do not know how valid the case is for a falling dollar, but, in case the argument has merit, it may be wise to include a higher percentage than one might otherwise of foreign stocks or funds.

Below I have provided my current picks for a growth and income portfolio that combines domestic and foreign assets. The first four, AIRT, OLN, SXI, and UTR, are domestic assets with comparatively low price to earnings ratios, reasonably low debt to equity and dividend payout ratios, apparently good long-term growth potential, and higher than average dividends.

The last two are exchange traded funds specializing in foreign stocks. The first, VWO, focusing on emerging market companies, has greater likely volatility and a lower yield but also better growth prospects. The risks inherent in this fund would seem to be adequately offset by its wide diversification plus suggested investment in the other portfolio assets. The second, DTH, was chosen for its diversification, value orientation, and high yield.

Taken together, these six assets hold some promise of providing favorable returns without undo stress for the investor. I would recommend that one review the asset holdings after a year and a day. However, the intention is that all six be held together for about a 3-5 year duration. The portfolio's average price to earnings ratio would be just 11.2. Yet its overall yield would be a hefty 3.4% (net of likely foreign dividend taxes for the ETFs).

As always, it is best to do one's own due diligence and/or consult with a broker or financial advisor one has reason to trust before investing in any asset.

Company or FundSymbolRecent
Price to
Air T, Inc.AIRT$7.839.33.2%
Olin Corp.OLN$16.678.14.8%
Standex International Corp.SXI$28.1612.03.0%
Vanguard Emerging
Markets Stock ETF
Wisdom Tree DIEFA
High-Yielding Equity ETF
(*The VWO and DTH indicated dividends are net of estimated foreign dividend taxes.)

(**The major market averages have significantly higher P/Es [about 19] and lower dividends [about 1.6%].)


Larry is not a professional. Don't take him seriously!

Actually, the investment article provided here is for general information only and should not be considered as professional advice, a solicitation to buy or sell any security, or the Word of God. Investors are encouraged to do their own research while considering their personal goals and circumstances, or consult their own professional financial advisors, before making investment decisions. Neither Larry nor LARVALBUG will be liable for any losses sustained by any visitor to this site.

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)

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