Question for Mr. Optimus (optimus25)

[jacobnbr1]

You will know this answer I am sure. Say I want to be diversified. And in my diversified porrtfolio I have a tech. Company of 1000 shares or say MOT. Will I still be diversified if I have 500 shares motorola and say 500 shares of SWKS. Because they are paired but same position amount.

Thanks.

[optimus25]

Yes and no. That's a tricky question because both stocks are different prices if you're looking at it from a price perspective vs owning 1000 shares of just MOT.

With that aside, yes you are diversified because each stock is in a different industry. Take for example 1 pencil and visualize it as your portfolio. Try to break that pencil and you probably will not have any trouble. Now add another pencil, you can probably break two pencils but are you starting to get a good picture. Most experts think a proberly diversified stock holding consists of around 8-10 different stocks.

The "no" you are not diversified has to do with the sector because both are in Tech. Its more of a "yes" than "no". Hope this helps.

[jacobnbr1]

Yes and no. That's a tricky question because both stocks are different prices if you're looking at it from a price perspective vs owning 1000 shares of just MOT.

With that aside, yes you are diversified because each stock is in a different industry. Take for example 1 pencil and visualize it as your portfolio. Try to break that pencil and you probably will not have any trouble. Now add another pencil, you can probably break two pencils but are you starting to get a good picture. Most experts think a proberly diversified stock holding consists of around 8-10 different stocks.

The "no" you are not diversified has to do with the sector because both are in Tech. Its more of a "yes" than "no". Hope this helps.

so does that mean you cant own a oil and a natrual gas being they are both from the sorce.?

[optimus25]

Somewhat. Diversification is a really tricky thing because we're probably thinking about two different things. There are a number of different criteria for analyzing diversification. It can get really complicated w/ different asset classes, market capatilazition, industries, sector's, etc.

You can certainly own two stocks within the same sector. As a long term investor I really shy away from buying within the same sector unless I'm diversified in other sectors and industry.

[jacobnbr1]

if i have within my porfolio a place for speculation or as cramer says "mad money" and say that amount is 10k. would it be better off to have diversification within the mad money or only one speculation trade? example: holding cnxt because it could turn around from some i dea and hoku because they could have the ultimate hydro fuel cell? (if you can understand what i am saying. i know cramer always says to have a group of stocks for possible mergers or buy outs.

[optimus25]

Its really difficult to diversify Mad Money. Treat it as if you don't need it and trade in and out of his picks.

10K will allow you to buy 2-3 stocks to trade. Make money then move on to the next stock. Trading is speculating so it would be difficult to diversify Cramer's picks unless you're holding for the long term.