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Rule #4 – Diversify, diversify, and diversify
Reminder: Always diversify your portfolio into at least 10 different stocks. It doesn’t matter if you are starting with $10,000 or $100,000–you’ll have more success if you think big and proceed as though you were a major-league investor. Diversification is important because while one sector of the economy might be falling 10%, rarely does the whole market sell off 10% in the same time period. So, with a properly diversified portfolio, you may get stopped out on one or two stocks, but hopefully you will have gains in others.
Warren Buffet Diversification
TD Ameritrade
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Some of the great investors and portfolio managers over the last 30 years (Peter Lynch, Warren Buffet) talk about having the “ten-bagger” in their portfolio. Sure, it’s nice to pick a stock that gains 10 or 20 percent a year, but what really drives a portfolio higher is a stock or two that tenfolds, or earns a 1,000% return. Over the years, Apple Computer (APPL), The Gap (GPS),Coca-Cola (KO), are some of the few that fall into this category.[endmark]
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