I recently read in a comment that a portfolio should not have more than 5% (of the portfolio total) invested in one stock. (If that is the case, I'm embarrassed to admit how many shares of CVX I have because somebody might pop a bolt.) Is the 5% rule true? Thx. A Midwest cougar
Warren Buffet believes in concentrated positions. The top 5 or 6 stock holdings in Berkshire make up over 70% of the holding company. This goes against what everyone tells you to do, but it worked for him. An investment in CVX, XOM, COP, and RDS are almost no brainer investments when you realize that energy demand will increase significantly in the future. These companies are all well balanced between nat gas and oil, and are sure to be winners over the long haul.
Sentiment: Strong Buy
Modeling shows that a large amount of diversification effect occurs with 20 different stocks in your portfolio. For most poeple, getting a market index mutual fund is the way to go. Then you have essentially market matching diversification.
Lots of CVX employees are very heavy on company stock and options. If something really bad happened (e.g. Macondo or Enron), those people could be harmed substantially including loising their jobs. On the other hand, Chevron stock has tended to outperform over a long period.
Risk/reward. IF you could not bear the value of your Chevron going to zero, you should diversify.
I would say that's low, that would mean owning 20 stocks. Can you watch and scrutinize 20 companies? I know I couldn't.
The % depends on how well you can handle the ups and downs of your $. I would say no more than 20% in any 1 company. That's the high end imo.
I agree that trying to track individual stocks makes it tough. That's why we have mutual funds. If you have 5 stocks, and one of them Enrons, can you bear to lose 20% of your portfolio?
Emo & Tig: Thanks for input. Good reminder about Enron. I cannot imagine CVX going belly up. (However, anything is possible.) CVX's dividend is amazing.. Finally, I could not watch 20 companies.