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ccoolidge Member	23-Dec-2010 11:07        ccoolidge About Contact  Quote this Post! Style: Combined   Mood:
x 0   x 0  Alert Admin	I totally agree about investing about 5 counters. But I believe one should decided for oneself on the number of stocks that one can keep close watch of. The monitoring process is time-consuming, effortful and requires constant discipline. If over-diversification means less comprehension of individual holdings, then maybe it might be time to reduce the number. Also, diversification is not just about minimizing losses, but also maximizing your chances of picking a winning counter. It would be a terrible waste of time, money and effort if the sole counter one chooses to invest, fail to reap the expected returns, or even worse, suffer massive losses. It is almost a win-win situation! (Note: I really mean "almost")
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Valtron Member	23-Dec-2010 08:52        Valtron About Contact  Quote this Post!
x 0   x 0  Alert Admin	Very well explanation. The key thing to me is not to diversify into too many baskets, as you had mentioned not all of the baskets will become super performers at the same time. So choose 3-5 counters wisely and invest be it for long term or short term.  jeremyow      ( Date: 22-Dec-2010 23:29) Posted: It is always a good choice to diversify whether one is looking to invest for the long term or short term. There is nothing perfect in this world and the same applies to any type of investment. Things may change suddenly and catch one unaware, so the need to diversify so that not all eggs are in only one or two baskets. Imagine with only one basket, if this basket fails suddenly, all of one's capital may be wiped out. If two baskets, either one basket fails, and one will suffer a 50% loss on capital assuming one invested equal amounts into each of the basket. So, statistically speaking, it is better to diversify to at least three or more baskets so that one still have a chance to fight another day should one of the basket fails. However, if one overdiversifies into for example ten baskets or more, this may become a case of being too conservative. Although one have a very slim chance of all ten baskets failing at the same time, he will also have a very slim chance of making exceptional returns since it is very rare for most if not all of his baskets to become super peformers at the same time even after he has carefully selected all his baskets.  The idea is to concentrate one's total investments into between five to ten different carefully selected baskets to have a good balance between risk and reward. The more confident one is in the selection of the baskets, the more he should work towards concentration instead of diversification. This confidence is not an emotional gut feel of confidence, but should be based on the level of investor's knowledge and experience. Investing is not a simple exercise. Do not underestimate the amount of investor knowledge and experience that is needed to make good investment judgment. Keep learning and absorbing (from own reading and interacting with different investors and business owners) to gain confidence in investing. <If one is ignorant, diversification works best. If one is savy, concentration is better than diversification. However, never put everything into one or two baskets because one can never be too confident to know the future as the future is fickle-minded.>
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jeremyow Senior	22-Dec-2010 23:29        jeremyow About Contact  Quote this Post! Style: Flexible   Mood: Yells: "Passionate business investor"
x 0   x 0  Alert Admin	It is always a good choice to diversify whether one is looking to invest for the long term or short term. There is nothing perfect in this world and the same applies to any type of investment. Things may change suddenly and catch one unaware, so the need to diversify so that not all eggs are in only one or two baskets. Imagine with only one basket, if this basket fails suddenly, all of one's capital may be wiped out. If two baskets, either one basket fails, and one will suffer a 50% loss on capital assuming one invested equal amounts into each of the basket. So, statistically speaking, it is better to diversify to at least three or more baskets so that one still have a chance to fight another day should one of the basket fails. However, if one overdiversifies into for example ten baskets or more, this may become a case of being too conservative. Although one have a very slim chance of all ten baskets failing at the same time, he will also have a very slim chance of making exceptional returns since it is very rare for most if not all of his baskets to become super peformers at the same time even after he has carefully selected all his baskets.  The idea is to concentrate one's total investments into between five to ten different carefully selected baskets to have a good balance between risk and reward. The more confident one is in the selection of the baskets, the more he should work towards concentration instead of diversification. This confidence is not an emotional gut feel of confidence, but should be based on the level of investor's knowledge and experience. Investing is not a simple exercise. Do not underestimate the amount of investor knowledge and experience that is needed to make good investment judgment. Keep learning and absorbing (from own reading and interacting with different investors and business owners) to gain confidence in investing. <If one is ignorant, diversification works best. If one is savy, concentration is better than diversification. However, never put everything into one or two baskets because one can never be too confident to know the future as the future is fickle-minded.>
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Valtron Member	22-Dec-2010 17:32        Valtron About Contact  Quote this Post!
x 0   x 0  Alert Admin	How you define smart diversification?? Hulumas      ( Date: 22-Dec-2010 16:12) Posted: Smartly Proper Diversification is better. Valtron      ( Date: 22-Dec-2010 15:44) Posted: Is it better to diversify your portfolio or concentrate on one single stock to have better capital gain? Let's discuss.
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Hulumas Supreme	22-Dec-2010 16:12        Hulumas About Contact  Quote this Post! Style: Flexible   Mood: Yells: "INVEST but not TRADE please!"
x 0   x 0  Alert Admin	Smartly Proper Diversification is better. Valtron      ( Date: 22-Dec-2010 15:44) Posted: Is it better to diversify your portfolio or concentrate on one single stock to have better capital gain? Let's discuss.
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Valtron Member	22-Dec-2010 15:44        Valtron About Contact  Quote this Post!
x 0   x 0  Alert Admin	Is it better to diversify your portfolio or concentrate on one single stock to have better capital gain? Let's discuss.
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