Comments | _sachiel: (без темы)

_sachiel

(Untitled)

Mar 14, 2006 11:26

Hurah! I am finally doing at least decent in a realistic portfolio scenario! I created a portfolio, realistic of $10k about..a week and a day ago. Within that period my portfolio, which is, I believe, properly diversified, has performed excellently, neting me a healthy 9.8% so far. Of the top winners in that portfolio lie, True Religion, up 9.35%, ( Read more... )

Comments 5

10secimportpyro March 15 2006, 07:05:06 UTC

it could be diversified more. 11+ stocks is better diversified. of course, the more the better.

_sachiel March 15 2006, 08:07:12 UTC

why 11?
I dunno..the more you own, the harder it is to pull a profit, especially when you have little to no money in the first place to play with. I suppose you diversify in hopes that a few of those companies will be bringing you to the top...but..I dunno, 11?

10secimportpyro March 15 2006, 08:15:12 UTC

11? it's more than 10. I have a graph i can show you sometime that shows that with more than 10 stocks, the idiosyncratic risk of your portfolio is greatly reduced. More stocks will reduce it, but at a reduce it at a reduced level each time (derivative).

pulling off a profit with more than 11 stocks? well, it depends on risk and such. if you put all of your money into one stock and it goes up, obviously you'll make a big profit. but the point of diversification is to hedge your bets in case one or more stock goes down due to firm-specific risk.

also, why is it necessarily harder to pull a profit with more stocks? if they all do well, you do well. risk-reward.

_sachiel March 15 2006, 23:15:14 UTC

Its harder to find 11 stocks which will all do well. Granted, I understand diversification, and I understand why you dont pour everything into one or two companies, that is a given. BUT, I think it is possible to have diversification with less than that...or more. I mean, you can have 20 companies, but if they are all tech stocks, or oil stocks..that isnt diversified (there are soo many people out there who do only that, its crazy!). If you are able to spread your stocks out evenly amongst various industries, you should be able to be properly diversified with as little as 6 or 7 companies. There are also other factors of diversification, such as knowing which companies do well at different times in the market. Like..essential's do well when money is tight, while other more exotic companies will do well when consumer spending and confidence are up. Its a matter of timing, as well as diversification ( ... )

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