Comments on: Basic Investment Strategies, Part 1: Diversification

By: Zarin

Zarin — Wed, 20 Feb 2008 00:48:07 +0000

I guess I’m thinking about the diversification before looking at the actual shares to buy. For instance, if it’s a good idea to hold 4 lots, then I could spend $5k on each lot, then research the shares in each sector to find the best stocks around $5 per share.

Is this a good strategy to use, or should I be looking at the best stocks first and try to include diversification secondary?

Cheers.

By: Sean Rasmussen

Sean Rasmussen — Tue, 19 Feb 2008 14:51:25 +0000

Hi Zarin. Diversification depends on your investment bank and the price of the shares. For instance, if you want to own 100 US shares in Google, your money wont go very far. So it depends on the price to a large degree. It’s very hard to say without knowing what stock you’re looking at.

I have a portfolio that is backed by a 100% loan and it is hedged with Put Options. The shares are insured at 100% of their purchased value and currently, I’m pretty happy with that decision considering the state of the local market.

By: Zarin

Zarin — Tue, 19 Feb 2008 14:20:15 +0000

HI Sean,

Thanks again for all the effort you are putting in to helping others. I am looking forward to your weekly posts on Basic Investment Strategies.

Regarding diversication: In your opinion, If an investor had $20k how best could that be divided between the stocks and sectors? 2 lots, 4 lots, 6 lots?

Have a great day!