diversification

M

Marc

is there a right amount of diversification or is there such thing as too much? for instance if you have 30k to invest are you better off buying 10 stocks with 3 k each or 5 stocks with 6k per each?
 
Buying 5 or 10 stocks is not diversification, it is buying 5 or 10 stocks. They can go down all at once. Diversification means to diversify: stocks, bonds, commodities, cash, currencies, real-estate, metals, hedge funds, art, etc. With 30K you can only gamble and eventually lose it all unless you are a master trader.
 
i see, i thought exposure in 10 different markets such as tech, energy, pharma ect. was enough diversification for a stock portfolio, i do have some money in real estate. as far as stock portfolio diversification, what is your take on mutual funds?
 
Operative concept: Diversifying in "non-correlated" instruments

Spend some time drilling down links at Investopedia

Key Terms:
Diversification
Correlation
Asset Allocation

Then you may consider looking at various ETF's as opposed to individual stocks.
Little less volatility than picking 10 stocks out of 5,000 + issues

+1 on not relying on forum's
 
bashatrader said:
IMO You should contact a registered and qualified financial adviser. Forums are not the best place to discuss investments.
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If these advisers are any good, they would be investing their own money already. But I imagine, like doctors who are not supposed to treat themselves, these advisers are not supposed to follow their own advise.

To the OP: just buy the minimum for each stock, while taking into consideration of the cost, and you should be well diversified. The goal is to avoid a situation where any one of them going belly up taking you down with it. As for all of them going down at once, that shouldn't matter too much if you don't go out of you way to pick losers. Over the long term, the market is going up.
 
Marc said:
i see, i thought exposure in 10 different markets such as tech, energy, pharma ect. was enough diversification for a stock portfolio, i do have some money in real estate. as far as stock portfolio diversification, what is your take on mutual funds?
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You should get paid for owning equities and taking on market risk. Assuming you are looking for long-term holdings, look at big-cap, dividend paying stocks and reinvest the dividends. That will help smooth your ups and downs over time.

Mutual funds are the last place you should be. Why pay someone else to do what you can do for yourself?
 
lindq said:
You should get paid for owning equities and taking on market risk. Assuming you are looking for long-term holdings, look at big-cap, dividend paying stocks and reinvest the dividends. That will help smooth your ups and downs over time.

Mutual funds are the last place you should be. Why pay someone else to do what you can do for yourself?
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i agree 100% I am not up for paying anyone to do something i can do myself given that i have the knowledge. however if i were to go with a mutual fund id do an index fund, Ive heard vanguard is pretty good for their index funds if your a long term investor, but i don't know many people that use it. since index funds have much lower cost than other mutual funds and if i just hold for long term there should not be any high trading fees.

as Ive been told by a college professor, the reason you would do this is so index fund automatically chooses the top performing companies from each sector and all you would have to do is choose how much exposure you want in each of those sectors. but again Ive never done index funds. do any of you guys have experience with them?
 
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