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Never, ever put more than 4% of what you are worth in any one stock - ask the Enron, Lucent etc. employees who knew how strong and solid their companies were. Or more recently the Shell employees who found out about reserve fudging.
In long term savings its important to never have a loss you can't accept and by limiting to 4% in one stock you tend to assure that. Same applies to one industry -- DIVERSIFY
Agreed--and without giving too much away it is a bit under 4% of my total holdings--as stated on another post, I am mostly a mutual fund guy and slowly moving money into safer forms over the next several years since I am 58 years old. Waiting for interest rates to go up just a bit.
Why any of us non professonals think we can beat the market over any sustained period is beyond me since there are only a small handful of professionals that can even do that.
4% ain't much to invest unless we're talking a million dollars. I own Shell and BP and a few others. RD's stairsteps have had a better return than the others, so to each his own. Best to you, GO BP!
Perhaps I see no problem with 4% because I do invest several million $?? 25 stocks is certainly not too many for a portfolio and that is 2what 4% gives you.
Feel free to concentrate your investments - its your money - but if you pick Enron instead of Micorsoft don't expect sympathy.
johngaltil... never more than 4% in any one stock?... makes it that much harder to grow the portfolio, or to manage it... sounds like either a mutual fund or index might suit ya... i owned shares of enron, up till their sell sheets were promoting broadband capability over their bread & butter pipeline assets, back in 1994's annual report... i briefly owned lucent, when they bought out ascend communications, yet reviewing lucent's balance sheets, they didn't sit right with me, thus i sold and once again didn't lose... guess the point is that one should constantly review their position... never owned shares in shell, simply in that i prefer the cash flow of "quarterly" dividends, versus semi-annual, though i do own shares of the likes of eni and total, yet because they could explore where western oil companies were forbidden to go... per never having a loss that ya can't accept, i'd suggest not investing money that ya can't afford to lose... the idea of diversification was created to encourage the general public to invest in mutual funds and the masses bought into the idea... yet the narrower that one can focus on, although the potential risk may be greater, sooo is the potential reward... and if y'all are investing funds that ya "can" afford to lose, then where's the risk?... this group is bout british petroleum, of which i loaded up on after the kuwait fires devestated bp's wells and the stock tanked, then added shares as it rose, then again in early 2003 when its shares dipped... the breadth of the company makes it safe to have a large percentage holding, ever since they added amoco, arco and burmah... myself, my largest holding, with over 50% is exxonmobil... yet bp has a lot going fer it and certainly is low risk, thus if ya wish to load up on it, go fer it!...
I'm in agreement with katwebtv on this one. I'm in my early 30s, I can afford to be a bit more aggressive with 35% of my money in individual stocks. I have six stocks - an average of 5-6% of my money in each one. I wouldn't want to have more than 10% of my money in one stock, unless it appreciated to that point. Hey, those folk who were overweight in Enron and Lucent weren't complaining when the stock was going up, were they? And incidentally for all the hype about RD and their reserves downgrades, yesterday's closing price was about 3% lower than it was before the downgrade. It went down 12% and has since climbed back to within 3%. Enronesque? Hardly.
When I buy stocks I am putting my chips down, sink or swim, with a couple companies I believe in. Obviously you want to make sure you know how those companies operate, how they are governed and how they have performed. If you try and buy several stocks (>10) to stay diversified, you might as well buy a mutual fund. Stock ownership is the very opposite of diversification; 4% sounds like a low maximum for any single shareholding. Sure you can get burned, but if that's what you're afraid of, you shouldn't be buying stocks. For every Enron, Lucent or Global Crossing you have hundreds of stocks that go up 15% every year.
your position on asset diversification is getting beat up by several people who either got lucky, have not learned reality the hard way, or are (most likely) making up their stories.
i probably should ignore carleton and katweb (same person?) as you have but did not want to let "their" position(s) pass without pushback.
smart money knows your position on diversification and asset allocation is the correct one. over time, stock pickers lose. 95% of gains are the result of style allocation, not specific stock picks.
of course if you bought MSFT of DELL or whatever at issue and sold at the peak and put your gains in a money market fund and never played the table again you would have beaten the market. but nobody does all four of these things. particularly the touts on this board...who pretend to be brilliant analysts but could not possibly know the inside workings of the companies they claim to have profited from and thus could have been caught with their you know whats in their hands.
if you bet the farm you will eventually wind up picking peaches in California.
good luck to you.