Ah ha --- no...... is the simple answer. This is a "guide" not a hard and fast rule and it's just to keep people from risking too much in one single investment. But now you just work to invest any new money to keep all in balance. It's like diversifying. You do that the best you can - but obviously - nobody can be perfectly diversified. You just think about it when making your choices.... Like I don't need 25% of my investments in OIL... etc. If you have 25% in oil - then you're next purchases need to be in something else.
These "rules" work better when you have more money invested. Their intent is to keep you from losing too much or being down too much. But if someone only has $2500 invested - it's pretty ridiculous to think they can stay at 5% AND be diversified. At 10K - they could then maybe be 10% per investment (1K) and have started to have some diversification. At 100K invested - now you're on your way to the 5% with 20 names and you should absolutely be diversified.
Even at my level - I can't always stick to the 5%... but I'm always aware.
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