Diversification & Position Sizing

Whenever we speak of diversification, the idea here is to diversify broadly, and be certain that you never have more than two companies in the same line of business in your portfolio.


One of the most important concepts to follow when diversifying the equity portion of your portfolio is to follow a position-sizing-strategy, where you never invest more than 5% of your equity portfolio in any single stock. This way, you will never experience a serious dent in your net worth simply because one stock fell out of bed.

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