2 Necessary Conditions For Portfolio Diversification - Warren Buffet Approach

2 Necessary Conditions For Portfolio Diversification - Warren Buffet Approach


I bet you must have been told at one time or another not to put all your eggs in one basket before right? No doubt diversification is a must but how many stocks you should buy and how much money you should be investing in each stock is depends on these 3 necessary conditions for portfolio diversification.

In return, you'll be having the best asset allocation strategy that will effectively utilize all of your hard earned money now and forever.

How Knowledgeable Are You

To make the most money from stock market, invest in what you know the most. You must know the company inside out. At least, you must understand its business model, which industry the company belongs to and how the profit was generated. Also, don't forget to spend enough time to understand the nature of its business, effectiveness of its management as well as the unique selling proposition of its products or services compared to its competitors.

From there you can decide if the company is a great investment opportunity indeed.

But the main problem that most novice investors have is they don't know where to start. They just don't have idea which stock they know the most. Unlike Warren Buffet who has been taught about stock investing since he was 11 years old, most of us need to start from bottom. You can either start with something you know from your hobby (e.g. computer or software geeks), whatever you have learnt from your office or anything that you are interested in.

Thus, making yourself familiar with the industry results should be one of the top necessary conditions for portfolio diversification. It gives you better understanding of how well the company has been doing so far. And most importantly, what will be its future in years to come. If you are confident with the stocks future profits and cash flow, it becomes less risky for your money to grow.

How Much Money You Have

Obviously, the more money you have the better. Unfortunately, not many of us have the same fund as Warren Buffet does, unless you have inherited millions of dollars from your wealthy parents. Even if you do, the money is still not enough. I'll let you know why.

What makes Warren Buffet's investment so different than many of us is that, once he discovered great stocks offered at discounted price, he will buy not only millions but billions of dollars. His stock purchase alone is sufficient to make the stock prices moves significantly that time.

With that kind of investment, he has enough votes to influence the company's direction. For example, his holding company, Berkshire Hathaway, owns more than 15 per cent of all the outstanding shares of Coca Cola. As the matter of fact, he has been sitting on the company's board for at least 17 years.

You tell me who else have the luxury of sitting in the board of management.

Therefore, just because concentric diversification has worked well for Warren Buffet, it is not necessarily worked well for you; unless you have billions of dollars investing in such companies though. Therefore, as much as possible, allocate huge (if not most) of your asset into something that you have the most control. This can either be your real properties investment or starting up your own businesses.

How to Use Flickr as a Comic Art Portfolio

If you re a comic artist, Flickr is a quick, easy and inexpensive way to showcase and share your portfolio. You can upload up to 100 megs of graphic files for free every month (5 megs per graphic file maximum). You also have access to a huge community of users and, if you choose, you can display your comics as a slideshow. If you need more storage space and bandwidth, you can open a Flickr Pro account that allows you to upload unlimited amounts of graphic files (10 megs per file maximum) for $29.95 per year.

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Step1
Register for a Flickr or Yahoo account. Note that if you already have a Yahoo account, you need not register for Flickr.


Step2
After logging into your account, upload your first graphic file (5 megs maximum per file). Click the Browse button. Locate the specific graphic file on your computer drive that you want to upload to your Flickr page. Click the Upload button.


Step3
On the Describe your photo page; enter a Title for your comic. Briefly describe your comic in one or a few sentences and enter search engine keyword tags. Click the Next button.


Step4
Set up an alias for your unique Flickr URL. This is an optional step. You may skip it by clicking the Skip this step link.


Step5
Set up your unique Flickr account icon by either using an image that you ve already uploaded to Flickr, or by uploading a new image from your computer hard drive. You may also skip this step and go with Flickr s generic icon.


Step6
Create a personal profile. This is also an optional step that you may want to skip.


Step7
Upload more comic image files.


Step8
To organize your comics into specific sets, click the organize link on the top row of your Flickr home page. Choose create a new set. Drag comic files from your new set to the work field. Enter the name of your set and click save.

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