No. of Recommendations: 3
Author: jrhii Date: 4/13/02 3:15 AM Number: 34189
I don't agree with that kind of philosophy... that would mean owning more than 25 stocks. Keeping up with the 8 I currently own is enough work, thank-you-very-much.

This is precisely why mutual funds were created. If you are going to hold your entire portfolio in individual stocks, you should hold 20 or 25 of them to reduce your risks. If you are holding only 50% of your portfolio in individual stocks, you should hold 10 or 12 of them. This all adds up to a recommended 4% to 5% maximum in any one stock.

However, if you know a company very very well, most investors will agree to go up to 10% of your portfolio, but only if it is a well established and stable company.

I hold a considerable amount of my retirement portfolio in individual stocks in order to get a higher dividend than the S&P 500 offers. I also know XOM quite well, and have allowed my percentage to increase to around 10%. I would not recommend doing this for any small high tech company. Too risky!

I also don't have more than 10% of my net worth in any one stock

I think it can be somewhat dangerous to think in terms of net worth when referring to your asset allocations. I feel that all asset allocation calculations should be made based on only your liquid assets (cash, stocks, bonds, mutual funds, etc). I don't think you should ever include your house, car, etc, when determining asset allocation percentages.

RK
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