A do-it-yourselfer asks whether he's too aggressive. By Jeffrey R. Kosnett, Senior Editor March 31, 2007 Don Hendricks lost more than half of his savings in the 2000-02 bear market. At age 70, Don, a retired human resources director for the federal government, knows that another massacre would have grave consequences for his golden years. Still, he keeps his $85,000 IRA in stocks -- $60,000 in 12 individual issues, the rest in funds. Don hopes the investments will generate $4,000 a year (a figure that needs to rise over time) to supplement his government pension and his earnings as a tax preparer. But he wonders whether his portfolio is too aggressive. Don began picking stocks in 2003, when he decided to ditch the poorly performing funds his broker had recommended. Don, who was already retired and living in Hot Springs, Ark., was so leery that he asked the broker to sell the funds, then worth $70,000, and move the proceeds to cash. The man demurred, and Don wisely agreed to give stocks another chance. But instead of using mutual funds, Don decided to pick stocks on his own. "If I take the time to do my research and I believe in the companies, I should beat the indexes," he says. MORE 2007 PORTFOLIO DOCTOR Find the Right Spot for Your Extra Cash Save for Retirement by Buying Land? Simplify Financial Clutter A Landlord Seeks a Solid Foundation Whether he beats the indexes is beside the point. The key issue is whether Don can reach his goal of $4,000 a year in income and gains with less risk. If so, he can move at least some of his money to investments that all but ensure that when he begins taking mandatory withdrawals this year, he can take out what he needs without ever exhausting his principal. So far, so good Don hasn't done so badly since parting with the broker in 2003. He's boosted the value of his nest egg to $85,000 in four years. Allowing for the money he has been withdrawing from his kitty the past few years, his annualized return is between 10% and 11%. But beyond an affinity for companies involved in food or energy -- commodities Don views as essential -- he doesn't seem to have a consistent strategy in his approach to stock picking. His stuff is all over the plate. Is it time for a shake-up? Advertisement Don's largest position, at 18% of the portfolio, is seed firm Monsanto. It has been a fabulous performer, but the stock now carries a rich price. Next is Cemex, the Mexican cement supplier, at 15%. It has also been a winner, thanks to the global construction boom. Don's third-biggest position is JF China Region fund, a closed-end fund that has been wildly inconsistent despite China's rapid economic growth. Other holdings include eBay, Southwestern Energy, Walgreen and a few speculative drug and oil issues. Most of these are solid companies. And just because oil prices have tumbled is no reason for Don to dump his energy stocks (see The Energy Surge Isn't Over Yet). But if he wants a margin of safety, he should diversify more. Because he receives a handsome pension and his portfolio is large enough to generate more than enough of the income he seeks, Don can probably get by without bonds. But Scott Noyes, of Noyes Capital Management, in New Vernon, N.J., thinks Don should sell some of his Monsanto and Cemex shares. "I would take half those chips off the table," he says. Noyes suggests investing the proceeds in exchange-traded funds, such as PowerShares FTSE RAFI 1000 (symbol PRF) and iShares Russell 1000 Value Index (IWD). They don't overlap the funds Don currently holds, Vanguard Mid-Cap Index and T. Rowe Price Global Stock. Plus, "with ETFs, he can still have the feel of stocks," Noyes says. Stumped by your investments? Write to us at firstname.lastname@example.org.