03-11-2016, 05:06 PM
(This post was last modified: 03-11-2016, 05:10 PM by ronn38.
Edit Reason: spelling
)
I’m interested in thoughts on the role of “breath” in diversification regarding a “buy and hold” portfolio.
As we all know, too little diversification leads to volatility and a greater potential for a severe loss of capitol, while excessive diversity creates the risk of under performance.
Personally, I’m within 10 years of using this income stream (mostly DRIP now), so I tend to place emphasis on yield without, hopefully, sacrificing quality.
My current strategy—
In building my portfolio, I have tended to purchase full positions in two 2 businesses in direct competition with one another (obviously I don’t cover all businesses). So in consumer staples I’d have KO and PEP, MDC and YUM, WMT and TGT. In telecom T and VZ (and VOD for a little international exposure).
However, I also like to use “clusters,” ether to reduce exposure risk or because I feel the sector very defensive and a staple for long term income generation. For example, to get exposure to Canadian banks, but reduce risk and volatility I bought BNS, TD, RY--using what would be 1.5 positions in a single company (say $15,000) over 3 (say $5000 each). So instead of having a position in RY, I have a position in Canadian banking—if that makes sense.
With UTS and tobacco (which I treat as UTS) I would/have buy full positions in each company; i.e. SO, DUK, D and WEP as 4 full positions (say, $10,000 each = $40,000 in UTS)). And with tobacco PM, MO and BTI as 3 full positions. Obviously, this create a larger portfolio (61 now, and about 75-80 when I’m done).
Opinions: would you think it better to hold--say $200,000--equally invested in Consumer Staples over 6-8 companies that represent competitive pairs (like KO and PEP).
OR…
Would you consider it more prudent/advantageous to simply hold much larger positions in Philip Morris International, Procter & Gamble and Wal-Mart Stores and that be your Consumer Staples holding?
$200,000 spread equally across RDS.B, CVX, XOM and BP or just XOM and CVX? (or would you say XOM, MMP and VLO and call energy covered)?
Thanks for your thoughts!
Ronn
As we all know, too little diversification leads to volatility and a greater potential for a severe loss of capitol, while excessive diversity creates the risk of under performance.
Personally, I’m within 10 years of using this income stream (mostly DRIP now), so I tend to place emphasis on yield without, hopefully, sacrificing quality.
My current strategy—
In building my portfolio, I have tended to purchase full positions in two 2 businesses in direct competition with one another (obviously I don’t cover all businesses). So in consumer staples I’d have KO and PEP, MDC and YUM, WMT and TGT. In telecom T and VZ (and VOD for a little international exposure).
However, I also like to use “clusters,” ether to reduce exposure risk or because I feel the sector very defensive and a staple for long term income generation. For example, to get exposure to Canadian banks, but reduce risk and volatility I bought BNS, TD, RY--using what would be 1.5 positions in a single company (say $15,000) over 3 (say $5000 each). So instead of having a position in RY, I have a position in Canadian banking—if that makes sense.
With UTS and tobacco (which I treat as UTS) I would/have buy full positions in each company; i.e. SO, DUK, D and WEP as 4 full positions (say, $10,000 each = $40,000 in UTS)). And with tobacco PM, MO and BTI as 3 full positions. Obviously, this create a larger portfolio (61 now, and about 75-80 when I’m done).
Opinions: would you think it better to hold--say $200,000--equally invested in Consumer Staples over 6-8 companies that represent competitive pairs (like KO and PEP).
OR…
Would you consider it more prudent/advantageous to simply hold much larger positions in Philip Morris International, Procter & Gamble and Wal-Mart Stores and that be your Consumer Staples holding?
$200,000 spread equally across RDS.B, CVX, XOM and BP or just XOM and CVX? (or would you say XOM, MMP and VLO and call energy covered)?
Thanks for your thoughts!
Ronn