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February 17, 2012

What does it mean to become the “most valuable on the planet”

Today’s “overheard” column in The Wall Street Journal asked the above question.  The question was generated from Apple becoming the most valuable stock.  Some other stocks that have held that title in the past include: General Motors ( decades ago), Microsoft (1999), Cisco Systems (March 2000), and General Motors (latter in 2000).  “…reaching the top spot has proven to be something of a curse.  Recently deposed Exxon Mobil is one exception, having made it to the top multiple times in a variety of different incarnations.  For most of these companies, the rapid growth, superior products, investor giddiness or sheer luck that got them there succumbed to mean reversion, technological changes and hungrier upstarts putting a target on their backs. Either Apple really is worth as much as the major listed U.S. phone companies, railroad operators and car makers combined-or history is destined one day to repeat itself.”
There is a lot food for thought in this article.  If you are a momentum or growth investor you are probably asking your self how much more you should buy.  If you are a value investor, you may be asking yourself if you should sell, take your profit and reinvest in other securities.
Apple’s growth is has been the driving component of the recent growth in the  S&P 500 and the NASDAQ.  If you own mutual funds that invest in large corporations or technology, you probably have more exposure to Apple than you think.  This may be a good time to review your financial plan and your investment portfolio to see if you need to re balance your portfolio.  If you recently rebalanced your portfolio, and you periodically review your investment portfolio, you have already done this and you know when you will next review your situation.
I am not implying you should become a trader.  You should periodically review your portfolios to see how how your situation and other factors impact how your investment portfolio should be constructed.  The timing will be different for everyone.  Some people review the investment portfolio allocation quarterly while others rebalance semi-annually or annually.  It is important to be consistent.

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