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Subject:  Re: foolish four/ira Date:  4/23/1998  8:47 AM
Author:  TMFPixy Number:  2996 of 90507

Greetings, Flakey, and welcome.

<<tonight 4/22/ 98 tmf sheard suggests that only 10,000 to 20,000 be invested in the foolish four yet on another occasion he intimated that the foolish four was a good investment vehicle for ira accounts. i just opened an ira with 20,000 and plan to fund it max contribution yearly. this will far exceed the recomended 10-20 k in the not to distant future . question is am i on the right track? correction for previous message the amount reccomended by tmf sheard was 5,000 to 10,000 not 10,000 to 20,000 i hope im not confusing anyone other than me.>>

Robert was talking about individual risk tolerance when he said, "Even four stocks alone is too concentrated a portfolio for my sleep-factor. Once you get up to a level of about $5,000 or $10,000, I feel you have to begin diversifying into other stocks as well to avoid putting too much emphasis on any one stock." That's his opinion and his philosophy. But it's certainly a shame he put a price tag on his diversification. Why? Because he also has said in the past that 12 to 15 stocks is more than enough for one's total portfolio

Think about that and think about how portfolios are supposed to grow. If my portfolio reaches $225K, even with an equal split I would have to have at least $15K in every stock. That's 50% more than the $10K number he used. Therefore, knowing Robert as I do, I doubt strenuously he was proposing that sum as a ceiling for the Foolish Four as a whole or even individually. Rather, he was stressing that for HIM he would not use that approach to the exclusion of the rest of the stock universe.

Better in my mind had Robert said something like, "The Foolish Four can be the core of my portfolio, but I won't let that core exceed 10% (or 25% or 50%) of the portfolio's total value when I reach a total value of $10,000." Those or similar words may have made his intent clearer. At least that's how I interpret what he meant.

You have to decide for yourself what makes you comfortable. Also, you have to decide what percentage of your portfolio will constitute the core. And nothing except your ability to sleep at night says how large or how small that must be.


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