• The portfolio is too diversified. Holding more than 100 different stocks and several mutual funds is not diversification. It is the same as owning “the market”. Why not then buy SPY (the EFT for the S&P 500) and forget about stock selection.
• The portfolio should focus on a specific strategy. This strategy depends on the outlook for business activity and the position of the business cycle at any particular point in time. The sectors in the portfolio should not be more than 3 or 4. Diversification may be required within any given sector.
• Stock brokers (or investment consultants) are not, let me repeat – are not, portfolio managers. They are not responsible for the performance of your portfolio. Their job is to give you advice on what to buy and, possibly, what to sell. The difference is that they make money every time you make a transaction. A portfolio manager makes money based on the performance of your portfolio.
• Measuring the performance of a portfolio is the most crucial step in money management. Performance evaluation helps you to isolate the poorly performing assets. They have to be dealt with to improve the performance of the portfolio. Act. Do not sit on your hands.
• It is difficult and time consuming for the average investor to isolate the poorly performing positions in a portfolio with too many issues.
• Flexibility in the investment strategy is a crucial trait of successful money management. Most investors are still holding technology stocks. They do not have the discipline and flexibility of recognizing investment themes.
(This Observations appeared in the 9/30/02 of The Peter Dag Portfolio)
More details in my The Peter Dag Portfolio and my free educational videos on www.peterdag.com.
George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest
To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.
Disclaimer.The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
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