We're "BUYandHOLDers" for the long term. We might not need this information now, but in a few years, as our stocks continue to rise (hopefully, no guarantees), we will be dealing with some hefty portfolios.

It seems a little silly now to worry about this, but the insight we gain will be used at a later time. Let's take the time now to understand how this stuff works.

We're diversifying. We're insuring that our stocks are not in a position that might cause us a future heartache because we had placed too much money and faith in just one of our companies.

Let's look at the 15% rule again from The Motley Fools with a more realistic initial portfolio…mine…which started out as a mere $500.00.

The rule is "do not have more than 15 percent of the total capital initially invested in any one stock."

Date Purchased Shares Security Purchase Price Current Price Current Value 6/19/00 .976 Medical $108.00 $66.75 $65.15 7/6/00 5.305 Consumer $60.00 $63.56 $337.18 8/25/00 23.17 Internet $4.00 $2.53 $58.62 9/28/00 3.116 Internet $31.00 $23.31 $72.64 TOTAL Original Investment: $533.59 $525.68

Okay. Let's first see if I've adhered to the 15% rule. Fifteen percent of my $533.00 is $79.95. And I'm already in trouble. My "Consumer" stock is a whopping $337.00.

And more importantly, if anything ever happened to that company, as in something bad…I'd be wiped out! I'd lose well over half of my investment portfolio!

Yikes! Now what? Should I move some of that money and put it into another stock?

It is very easy to have a concentrated position when you are just starting to build your investment portfolio. Keep your objective and goals in mind before you make your next investment. As you start to invest in your other securities your account will become more evenly balanced. You may also want to check out the article "Less is more" by Charles Carlson.

Before I panic, I have learned one thing…don't panic. I've only had my portfolio for 5 months. It's still in its infancy. I don't think I'm going to move anything yet.

I am, however, going to pay closer attention. I never realized that my portfolio was so "Consumer" heavy. Until I put the actual numbers in that chart, I had no idea.

Please take a few minutes now and put your stocks into a similar table. Paper and pen is fine. See where your portfolio might be a little top heavy and continue to watch how long it remains inflated. That could spell bad news down the road.

I've also added an "Original" value column to the above table. As you can see, I've made $8.00 in my investment portfolio. Remember a few weeks ago, I was "superinvestor" with my portfolio beating the S & P 500?

Now today, the S & P and I are running neck and neck in the red. My
"Annualized Return" that I'm using as a benchmark today is (-35.34). The S &
P 500 is (-15.66). We're having a definite bad hair day today, that S & P and myself.

Are we worried? Are we concerned?

Nah.

Next week we'll find out why, when the S & P nosedives, it's similar to an after Christmas sale and we'll look at why we should go bargain hunting when our portfolios move into the "red zone."

And I'll also continue to look at diversification. This actually is a complex topic, but well worth a slow-down on our part. I'm wondering if I've selected the right "segments" of the economy to be investing my money or should I be diversifying even more or should I just be putting money into the four stocks that I now have and don't purchase other stocks.

And I know that's a terrible run-on sentence but I'm just so confused. More clarification next time, I hope.

Joyce