Diversify, Diversify, Diversify

I should NEVER put my eggs in one basket! WCOM Trade #4 serves as a constant reminder of this important lesson.

I watch about 50 stocks and funds and target 8 of them to trade. I've found 8 to 10 stocks (24 - 30 "boats" (I will have up to 3 positions in any one stock)) is about my limit in order to deliver a decent return on my effort. The 37 other stocks that I watch but do not target serve as potential replacements for the 8 target stocks.

When I set sail, I diversify by launching several boats/several courses. This gives me plenty of options should the conditions worsen. So let's say the weather and conditions are favorable to launch a cruise (which usually means it is storming at the dock), I dedicate no more than 25% of my trading funds to any one stock or fund.

A good captain weathers the storm he or she cannot avoid and avoids the storm he or she cannot weather (unknown author).

In addition to dedicating no more than 25% to any one stock, I also leave port at several different times/with several different boats (positions) by dedicating no more than 33% of the 25% of funds allowed for a stock to any one trade. This again helps me diversify my positions so I'm not needing to be perfect each time I trade.

Fair winds and following seas!

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This is for informational purposes only and the information provided does not encompass all possible or probable outcomes and nothing posted here is an indication of future results. Nothing in this blog is a guarantee or promise of future investment returns and investing in stocks or bonds carries risks including losing your entire investment. I do not recommend, advocate or endorse any third-party links, resources or advertisements of any kind. Any investment decisions are recommended to be in conjunction with a Certified Financial Planner, a comprehensive and personal financial plan and all other components that make up your own financial situation.

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