When developing a portfolio, my first concern is an appropriate mix of assets. Asset allocation is based on Nobel Prize-winning research, which in theory optimizes the relationship between assets to provide the highest return for a given level of risk. Studies on the performance of professionally managed pension funds have found that 91 percent to 94 percent of a portfolio's performance results from the mix of assets. This makes asset allocation a logical starting point. In simple terms, a proper allocation insures that we don’t put all of our “eggs in one basket.” In light of current geopolitical events, this strategy is very prudent.

Bishop Street Capital Management provides investment management services for private individuals and institutional clients. Our approach to investment management assumes that the stewardship of wealth is as important as its creation. We work with our clients to understand their objectives then create the right mix of financial assets to meet their needs. Based on the parameters of this contest and current market conditions, we decided on an asset allocation of 60 percent to stocks for growth, using mutual funds for the equity allocation to provide diversification. Forty percent has been allocated to individual bonds and cash for capital preservation.

With a myriad of economic and geopolitical concerns, the current investment environment is turbulent. According to the hypothetical clients' scenario, I have begun to place money into the market according to my own econometric model of the investment universe. One pick, Imclone Systems, is extremely risky. The company has serious management concerns. However, their drug, Cetuximab (formerly known as IMC-C225), is designed to target and block the Epidermal Growth Factor Receptor (EGFR), a receptor that is expressed on the surface of a significant percentage of all solid tumors. It is being tested in a series of Phase II and III clinical studies.

Stocks rallied sharply this month as the Iraqi war came closer to a successful conclusion. Some of the recent caution reflected in consumer confidence and employment reports will fade. However, investors will grow impatient if the economic recovery does not get a second wind soon. So far, first quarter corporate earnings have largely met reduced expectations, although revenue growth is very anemic. Stock valuations are not cheap, but money market funds are not competitive with record low yields. We are constructive on the equity market, although it will probably be choppy and an annual return of 5 percent to 10 percent likely.

After several weeks of strong equity performance, it is probable that we will see some selling for short term trading profits. As attention shifts to the economy, long-term investors should continue to add to well diversified portfolios, tailored to the next economic cycle. We can anticipate a very visible effort by the President to promote his economic package through Congress before the end of summer. After three very stressful years, deferred business capital spending is likely to increase confidence in growing profits and higher share prices. Capital will tend to move from high quality corporate and government bonds to the broader equity markets.

Keeping in line with this client’s request for growth, ten stocks have been chosen. Individual stocks work well for clients who are already adequately diversified through mutual funds in tax-deferred accounts. For those with non tax-deferred accounts, growth stocks offer more control of capital gains taxes compared to growth mutual funds. The stocks were chosen for diversification in varied industries and the following criteria: Price/earnings that is less than it’s four-year historical average, PEG ratios below 1.5, historical and expected five-year EPS growth rates greater than 12 percent.When planning for retirement, to review your situation in case of emergencies.