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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Bob Rudd who wrote (13368)	11/26/2001 11:24:29 AM
From: Dale Baker	Read Replies (1) \| Respond to of 78470

I am reading Lynch's "One Up On Wall Street" right now, and you are correct. Lynch was referring to corporate acquisitions outside core businesses and not individual portfolios. However, some investors buy sector funds in niches like biotech, gold, etc. without having a clue what drives the price movement there. That would be comparable to a car company going into the sewing machine business.

To: Bob Rudd who wrote (13368)	11/26/2001 10:34:01 PM
From: Paul Senior	Read Replies (2) \| Respond to of 78470

Thanks, Bob. A discussion about Peter Lynch and diversification or concentration always seems to be on two hands, in my opinion. On the one hand, Mr. Lynch can be seen or heard or read telling individual investors to invest in what they know - go to those shopping malls, see what and where other people are buying, eating, etc. He's said, know as much about a company as you can - the individual investor ought to be able to follow 5 stocks (or was it more?) very well, and that might be all the investor needs, if I recall Mr. Lynch comments correctly. OTOH, when you read about how he managed his funds, they were broadly diversified. Didn't he have over 1000 stocks in Magellan at one time? And if he liked a sector, he sometimes bought the entire sector. Those mutuals or banks that went public -- he was known to have bought them all or nearly all. I don't know - maybe a few stocks made the bulk of his portfolio, but the man practiced diversification, imo. I am also still contemplating what I call the MB method of diversification (which I "discovered" after looking at some posted portfolios.) If on Jan 1, there are 12-15 stocks in a portfolio, and on July 1 there are still 12-15 stocks in that portfolio - but of those 12-15, 10 or more weren't there on Jan 1, is that a concentrated 12-15 stock portfolio? Or is it more diversified in nature (having gone through 12-15 stocks +10 replacements = 22-25 stocks? All this within 6 months, so maybe 35 held stocks annually. I realize diversification/concentration factors might depend on a person's specific tolerance for risk, years left in the workforce and goals to be achieved. Still, my opinion is that most folks are far better served by aiming to be diversified than by trying for concentration. Paul S.