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Author: A2Ninja Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Roth IRA diversification strategy Date: 5/18/2010 10:54 AM
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I'm a fairly young (28) professional who just opened a Roth IRA account with scottrade last year. I only have $10k invested in it and most of my other excess income is going towards debt reduction.

Contrary to everything I've ever heard about investing, I haven't focused on diversification in my Roth IRA, but rather I have selected a handful of stocks that I considered to be improperly valued, regardless of their business sector. The reasons why I haven't taken the standard diversification approach are:

1. I have enough time before retirement that I can afford to take some losses in my retirement portfolio and adjust my investment strategy as I move towards retirement.

2. Proceeds from Roth IRAs are non-taxable so if I were to hit a few homeruns, I could take the profits without paying taxes on them, but if I did it outside of a Roth structure, I would be hit with a tax.

3. I only have $10k (~5k invested), so my undiversified exposure isn't huge at this point. I will become more diversified as I invest more.

4. It seems to me that over the past 24 or so months market forces have been the main driving force in stock prices. In other words, there is a higher than normal correlation between which way any two stocks move because of market wide forces such as europe's debt crisis, panick, etc.

Given my situation, do you think it is reasonable to have an undiversified portfolio? Or should I set aside my greed for tax free gains and take my "free lunch"?
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