This article continues my five part newsletter series I published a couple of years ago on investments – Letting Your Winners Run and Protecting Your Downside (this stuff never gets old!)
Part 3 0f 5 – Asset Allocation and Industry Diversification:
When you are investing, an important consideration to minimize losses is to not put too much of your investing capital into any one idea. A good position sizing rule of thumb is to limit each particular investment to 4 to 5 percent maximum of your total investible assets (one exception is if you are in a plan that invests in stock of the company you work for and you have investment options, do not invest more than 10% maximum in your company.) This will limit your risk by spreading it out over a bunch of investments.
Next time in Part 4, I will talk a little bit about trailing stop losses and how they protect you from major portfolio disasters.
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