Diversification to Reduce Risk (in Dollars as of 3/31/2025)

To reduce risk, we limit portfolio investments to 7% per Company, 15% per Industry, and 33% per Sector. Our portfolio currently holds 39 stocks. Investors should have at least 10 stocks to achieve a basic level of diversification. It has been said that diversification is the only free lunch in investing.

Spreading your investments across different sectors helps to reduce risk.  We currently avoid Utilities and Real Estate because we see better opportunities elsewhere.  Four percent of our portfolio is now in cash, and we are seeking the right stock and optimal entry point.

Having a good mixture of asset classes also helps to reduce risk.  48% of our portfolio is comprised of Mid-Caps (stocks with a market capitalization of $2B to $10B).  Midcaps are preferred because they generally carry less risk than Small Caps and can grow more quickly than Large Caps.  

A stock with a beta of >1 historically moves more than the overall market.  This chart shows one-year beta's of <1 as Low, 1 to 1.19 as Medium, and >1.2 as High.  Fifty-five percent of our portfolio is currently invested in carefully selected higher beta stocks, ranging from 1.2 to 2.0, as we aim to outperform the market.

The battle continues yearly, with growth stocks outperforming in some years and value stocks surpassing others.  Core stocks have a mixture of value and growth. We prefer to have some of each style and adjust it as market conditions dictate.

Other assets such as Real Estate, Precious Metals, Bonds, Mutual Funds, and ETFs may also be appropriate, but this website is dedicated only to the individual stock portion of investments.