Diversify for Stability

by MF Ptah

I've been reading the folders here in Fooldom for quite some time. Like many of you, I started out as a lurker, but as luck would have it, I have risen to the height of Foolishness as a sweeper. All along the way, however, I have tried to maintain a well-diversified portfolio. Like many of you, I started out with basically zilch. Unlike some, though, I didn't throw all my eggs into one basket.

Just imagine how nasty that fruitcake would taste if it had been all rye flour. No sugar, no fruit, no anything else. Yuck. Or an all-chocolate diet? Sure it's great for a day, maybe a week, but then what? Although having a terrific stock in your portfolio is wonderful, without other ingredients to balance it, your baking won't amount to much. Granted, many of you will laugh and say, "I bought MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq:MSFT)") else Response.Write("(Nasdaq:MSFT)") end if %> or INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> or [insert your favorite Horatio Alger stock here] while it was a penny stock, and now I'm RICH, RICH, RICH!" Bravo, you were lucky... thus far.

What if you had bought only stock in bagels or a now-defunct company (there are zillions!!)? Well, we all see what's happened there. What if Microsoft gets caught for something hideously unspeakable (you know, like secretly using Macs in their offices) and goes down the tubes? Your plans to send Bobby and Lorraine off to Harvard just went the way of the betamax recorder.

The foolish goal of investing should be growth. Without growth, you may as well stick your money in the mattress. My own personal philosophy is put your money in stuff in which you believe, in stuff that will make it for the long haul, and in stuff that draws from various sectors of the economy. It's like adding sugar and fruit to that flour mess.

I'd really hate to see anybody go broke in Fooldom. I don't know about you, but I just don't have money to flush. I want to retire while I'm still young enough to enjoy life and have enough to help the kids out if they need it. I can't do that if my cake falls or rots, or if my portfolio can't handle wild swings in the market. An eclectic choice of my favorite ingredients will help deflect that disaster.

Eat up, Foolishly!