I pulled the book out today to review once again. I like to re-read these books every six months and make notes in them as I go along. I seem to pick up information in the third or fourth reading that I missed the first couple of times.
My mind is no longer a sponge, it's a bucket with holes!
I was re-reading some comments earlier today on old articles over on Seeking Alpha. It was funny to see the number of comments on how safe the dividend for BP was. I was one of the people who thought so. It had a 1 safety rating with Value Line.
We now know how that ended. It doesn't mean I won't focus on companies with a safety rating of 1 anymore, because I will. Focusing on safety doesn't eliminate mistakes, it minimizes them! C and BAC were another example of a mistake, but the concept has worked for far more companies than it hasn't.
That's why I diversify!
I currently own 40 dividend paying stocks in my portfolios and am looking to add 20 more. A lot of people think that's too many, it may only produce market returns, or less.
That's not my concern. My concern is the income stream!
Is it reliable! Is it steady! Is it predictable! Is it increasing!
If I only hold 10 positions and one goes belly up, I lose 10% of my income stream! (I'm trying to stay equally weighted income wise thanks to comments you made earlier.) If I own 60 and one goes belly up, I only lose 1.66% of my income stream. I can make that up in no time with a portfolio which currently has a yield of 4.8%.
Additionally, I can afford 6 or 7 belly ups with 60 equities and not be hurt as bad as 1 with 10.
Others may say keep an eye on things and you won't go belly up.
What if I'm in Japan or Ireland, enjoying my travels? I don't want to have to keep a close eye on it.
I'm still investing in quality! PG and KMB. JNJ and ABT. KO and PEP. O and NNN. CL, CLX and GIS. RDS.B, CVX and COP.
By buying the best of each sector, I'm still buying quality, but I'm not fully invested in one company that might pull a BP.
I'm avoiding ETF's because with ETF's you get the good and the bad. I'm trying to focus on the best of. We'll see if it works or not. My mind isn't totally closed, it just has holes in it. |
