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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: tekboy who wrote (6523)9/18/1999 9:21:00 AM
From: mauser96  Read Replies (2) of 54805
 
Whether to aim for consolidation or diversification depends mostly on the needs and psychology of the stockholder. If you are an older person with all the money you need to live on why risk this all this security by concentrating in one stock? If you are young with a high paying job extreme concentration may make more sense. The more money you have, the less the marginal utility of the next dollar. To a starving man, $5 is a lot, it means he gets to eat for a while. To a millionaire ,it's nothing.
The easy way to diversify is to buy index funds with some of your funds, and use the rest to invest in the types of stocks you understand. Excessive diversification by it's nature results in average performance..Too many stocks makes it very difficult to find the time to follow them. Personally, I find somewhat less than 10 to be the ideal, but I put a disproportionate amount of money in my best ideas. Most of the stocks on SI are very sensitive to bad news, and as anybody who held SAP can testify, even gorillas can approach senility <g>. Any stock that has "more than doubled since last spring" only appears to be low risk in retrospect. At the time buying it meant going against the consensus that was already priced into the stock.
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