Disclaimer

Prefix: The Legal Stuff: All opinions expressed in this blog are mine and may have been previously disseminated by me either accidental or knowingly. My opinions are just that my opinion, and should not be relied upon as such. Past performance of a stock or fund is not indicative of future results. No guarantee to any specific outcome or profit is meant or implied. My investments or strategies mentions in this blog may not be suitable for you and you should make your own independent decision regarding them. My material does not take into account your particular investment objective or objectives, financial situation or needs and is not intended as a recommendation appropriate for you. You should consider seeking advice from your own investment adviser before making any purchase or investment. I am expressing opinions; I am NOT inducing you to make a particular investment or follow a particular strategy, but only expressing an opinion. I am doing this mainly for my children and friends, you are reading this with my permission. I change my mind and opinion and will do so without notice, you need to be aware you have real risk of loss in following any strategy or investment. You may get back less than you invest, negative return or loss. I want you to use what I have learned and make independent decisions regarding investments or strategies I mention before acting. You always need to consider whether it is suitable for you and your particular circumstances.

Sunday, July 22, 2012

Limit Your Risk


Limit the Risk 

If you have been following my blog and advice you now have 5 stocks.  Consolidated Edison Inc. (ED) or another utility, Kraft Foods Inc. (KFT) or another food stock, Eaton Corp (ETN) or another industrial stock, and U.S. Bancorp (USB) or some other financial (Bank) stock of choice.  Last pick was an oil or gas my recommendation was Chevron Corp (CVX) but any oil sector stock would do.  Remember you can own any stock in the sector not the one I recommend.
I know Jim Cramer recommends you own only 5 stocks and research each one a hour a week.  I saw a graph like this in the Charles Schwab investor magazine “onInvesting”.  This graph shows the number of stocks owned on the vertical line is the risk and the horizontal line that runs parallel to the x-axis is the number of stocks you own.  With one stock your risk is at the upper left almost off the chart.  The more stocks you own the lower your risk.  In essence you become a mutual fund.
My recommendation is make sure you own only good stocks watch the company specific news and be willing to explain to someone why you own a stock.  If you can’t expain to a disinterested third party the logic behind why you own a stock, then you must sell that stock and buy a new stock in the same sector.  You can make love to your wife, making love to a stock is very unsatisifating and you can loose a lot of money money. 
I recommend you own a good stock in every sector.  Spend your 5 hours a week researching the market.  Remember half the movement of your stock is the market.  Flaten out your risk curve, follow the market.  In the next post we will explore new purchases.  Your goal is to own one stock the best stock in every sector.  Be your own Mutual Fund.  By being your own Mutual Fund you can outperform Mutual Funds because you can hold out of favor stocks with good fundimentals and hold them long enough to make good returns.  In effect you become your own Hedge Fund.

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