Bundashus -
Others might disagree, but I would not buy equal shares in a portfolio... there's really no logical basis to that. If you want to invest in the portfolio buy-and-hold style, I would do the following steps (some have been suggested already).
a. As someone said, do due diligence. Study the companies some. Decide for yourself what risk level you are willing to live at. Do you want to hold stocks of companies that aren't making money yet? Do you want to hold stocks of companies that have P/E ratios much higher than their annual earnings growth rate? You need to ponder these types of questions. Throw out the stocks that don't meet your criteria.
b. Try to pare the list down to about 8 stocks. Unless you have a lot more free time than most of us do, you can't really keep up with more than about this many. If you have problems deciding which ones to throw out, find some objective criteria (either growth rates, or price/sales, or something), and cut the list.
c. Buy based on equal $$, not shares. Of course, it doesn't have to be exactly equal... you may want to round to the nearest 10, or 25, or 100 shares, depending on your level of capital.
d. Watch the stocks... immediately sell any of these that drop 20% from where you bought them or 20% from the highest close after the buy. Some may disagree with this one, but I maintain that a 20% drop in almost all cases is beyond normal variability, and signals to you that the stock is sick.
Keep in mind this is not what I do, because I add technical analysis to the equation and trade more often, but if I wanted to buy and hold, this would be my approach.
Loren |
