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In a message dated 7/20/2002 7:27:59 PM Eastern Daylight Time, chmeyer@xxxxxxxx writes:
I've heard from a couple of sources that the optimal method of
diversification
in a stock portfolio is to have no more than 3% in any single issue. To be
fully invested would there require owning a total of 33 individual stocks.
Chas,
I would take this one step further and look at the overall market from a top/down approach. Rather than be invested at 100% at all times I would look at the health of the market. Each individual would have to come up with their own way of evaluating the market strength. Let's say for instance that you are only talking about long trades. For example, through your methods, on a scale of 1 - 10, you rate the overall market as a 3. Keeping the same concept of only being invested in 3% of your total pie on any one issue, I would only hold 10 stocks vs. your 33 and keep the rest in cash. Those 10 stocks would be dispersed in at least 3 sectors which would be picked first through sector analysis and then through TA analysis. Just another thought!
Lenny
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