Growing Rich - Arabictrader.com

KIRK KAZANJIAN
volatility is of concern to you, sprinkling a few fixed-income securities
into the mix should do the job.
PRUNE THE WEEDS
Earlier, Shelby Davis compared a diversified portfolio to a beautiful
garden. Part of your responsibility as the caretaker is to keep an eye
on your crop of stocks and make sure everything is growing as expected.
If not, you must be prepared to take action. “Your job as a
gardener, or portfolio manager, is to weed the garden of a few mature
plants every year, plant a few new seeds, and, with luck, enjoy flowers
that bloom sequentially,” Davis insists. “In other words, once in awhile
you must add one holding here, sell another there, or replace yet another
here. The fact that you get a constant rotation in the market is
fine with me. It’s nerve racking, but that’s why I keep an eye on my
Bloomberg terminal. When something rotates out of favor, it may
create an opportunity. The most difficult part of this job is deciding
when to lighten up on one of my positions. That’s always tricky.”
Knowing when to sell is tricky indeed, and in Rule Twelve we’ll
discuss how to know when it’s the right time to bring out the hedge
trimmers in your portfolio.
THE BOTTOM LINE
Keep a well-diversified portfolio of 20 to 30 companies from many
different industries. This will reduce your overall risk, while making
sure you have broad exposure to a well-rounded number of sectors.
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