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Originally Posted by 96z28ss
Another newbie question about being diversified.
Lets say you have $50k to invest. Are you diversified enough with 3 stocks, 5 or 10?
At what point are you spread out to thin?
If you own stocks that pay a dividend, when they pay out, your dividend is only enough that reinvesting it get you only 1 share, or 4 shares a year.
Are you diversified too much. And holding more shares would compound quicker.
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I'll venture out, and offer my opinion on this...
I would say it depends on what stocks you've picked.. if you pick 5 stocks all in the "Tech" sector, your not diversified at all.
If you pick the "best of breeds" in 3, or 5, or 10 different sectors, NOW your diversified.
It was mentioned before, that it wouldnt be wise to invest more than 5% of your total investment money into a single stock. With that guideline, If *I* had 50k to work with, i'd probably choose between 7-10 Dividend Champs across multiple sectors, and feel "comfortable" about being diversified.
As for the "not enough to buy one share a year".. who cares. Its a % game 2.5% divided on 1 share gets you the same 2.5% dividend on 0.1 share, or 1,000 shares. You dont gain any extra for more shares at a time.. Thus id rather spread my 50k across a few sectors as previously mentioned, even if it means i only buy 1 share a year of that stock.
Just my 2c anyhow.