Minimizing Your Portfolio
Posted on Tue 3rd Jul, 2007 12:56:57 AM
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http://www.stocktradingtogo.com/2008/09/02/stock-tip-4-minimize-portfolio-diversification/
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I agree with you for the most part. If you have a day job, 6-7 stocks is plenty to try to keep track of. For me, investing is my life and I still don’t like to trade more than 25-35 names. The beauty of online trading houses these days is that one can trade for less than a penny a share even on small lots which puts the individual investor on a much more level playing field with the institutions. Heck, some people would even argue the individuals have the advantage now!
Time effectiveness definitely ties in there. I agree regarding the trade commissions being so minimal now a days, that is a huge help for sure. I’d argue institutions still have a huge advantage though over us simply based off the resources they have access to on a day to day basis
I totally agree. Ultimately, a diverse portfolio is more about a diverse asset allocation than diversifying within an asset class. If anything, you should want to get the best you can out of the stock asset class since it will likely be the one asset where you can generate the most return. This isn’t done by throwing a wet towel at the stock listings and buying as many stocks as you can, but by being smart and concentrating on finding the best performers.
So true, way too many over diversify and then they are statistically tied to the average… no wonder so many mutual funds can’t beat the average… statistically they are practically tied to it… and then they take off management fees…