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Diversification & Asset Allocation
#1
How important do you rate Diversification & Asset Allocation?

I feel diversification is fine as long as the stocks are in my list of DG stocks. I currently have:
Bank 26%
Financial 24%
Industrial 5%
Communications 22%
Pipelines 4%
Insurance 16%
Utilities 2%
Health 1%.

I'm not too concerned that I'm overweight on some because 95% of the stocks I'll hold forever (unless they go under). I jumped in heavily with some of the stocks just after the 2009 crash and it's proven to be a good move because my YOC really jumped and has kept growing as they increased the dividend.

As for asset allocation I am 100% DG stocks so that's a NO.
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#2
66% financials? You are a brave person, cannew. I'm worried about buying one financial! However, if you bought in 09 you've been rewarded handsomely, so good on you mate Smile
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#3
Its not which good DG stocks you buy but when you buy them.

Even though the Ins companies have not increased their dividend, my yield is very high so I'm not concerned about them (and as soon as interest rise, so will their earnings & dividends).
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#4
Diversification isn't all that important to me. I do have all the sectors covered, but I am heavily weighted towards energy and consumer staples.
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#5
Is there such a thing as holding too many tickers in one's portfolio? I used to have as many as 50 or more. For the past couple of years, that number has dropped down to between 15-25 different issues. In the past I have generally opted for the small basket approach for various sectors, especially ones that are more difficult to understand. With a small baskets of three for example: REITS, MLPS, big cap dividend champions, utilities, telecom, tech, shipping, international, one easily can end up with 35-50 stocks if enough categories get represented in the basket approach.

I tend to be fairly light on my DD, so the number of stocks is no problem. But more and more, I'm wondering if there is any valid reason to hold more than 15-20 tickers.
Alex
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#6
(09-25-2013, 08:36 PM)Ok Red Wrote: 66% financials? You are a brave person, cannew. I'm worried about buying one financial! However, if you bought in 09 you've been rewarded handsomely, so good on you mate Smile

Agree!

(09-25-2013, 08:52 PM)cannew Wrote: Its not which good DG stocks you buy but when you buy them.

Wise words -- double agree! (As long as you emphasize the "good" part...)

(09-26-2013, 10:44 AM)hendi_alex Wrote: But more and more, I'm wondering if there is any valid reason to hold more than 15-20 tickers.

I'm not sure there is a right answer to this one. I've only got about 20 companies right now and I am not at all uncomfortable that I am in danger from lack of diversification. Most of my holdings are gigantic global companies in their own right. I've always assumed I'd end up in the 30 to 40 stock range, but I have no specific target in this regard. And as cannew rightly points out, sometimes it is the opportunities that will dictate if you get into a company in the first place.
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#7
I surely think you can have too few holdings to be safe and obviously too many to track ( part time at least), but the "right" number I think depends on opportunity and personal insight -- or dumb luck ;-)

I bought CSX and NSC . Then I started to think about how things "move," and EXPD came on my radar. Now I find myself thinking about transportation overall, rather than just CSX and NSC as two good dividend stocks to own (as I mentioned elsewhere, I usually buy two "biggie's" in a field like MDC & YUM or CSX & NSC).

I never really imagined I'd have more than 20 or so stocks, but now I find myself with 28. So I think the number of stocks in your portfolio should be more a function of where the "logic" of your strategy takes rather than targeting a set numbed- or even range.

Ronn
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#8
The reason that I will have close to 50 stocks in my portfolio when is retire is the fear of a dividend cut. If one of my positions cuts their dividend, I'm out 2% of my income. If I'm holding 20 positions, I'm out 5% of my income. Also if I have the next Enron in my portfolio much easier if its 1 of 50 instead of 1 of 15.

Also, I know that I'm not Warren B so I don't feel I have the competence to just bet on my best positions.
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#9
Continuing on the theme of my small basket approach. It is pretty easy to think of each 'small basket' as a self constructed fund to achieve certain sector exposure. So there again with as many as 10-15 investment classes, and maybe 2-5 picks in each class, it is easy to see how a person could have a reasonably structured portfolio that would consist of 50 or more tickers. Heck, when buying a single fund, the investor can easily be holding 30-100 or more underlying tickers in that one purchase. What is the difference between that, and structuring the same through individual holdings, ie the Henderson Family Fund!
Alex
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