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As chief strategist/consumer education for Charles Schwab & Co. Inc., Schwab-Pomerantz is a leading advocate for individual investors. She speaks and writes extensively about personal finance issues and is a[…]

“Never have more than 20% of an individual stock or industry in your portfolio.”

Question: What are the “must not’s” of personal investing?

Carrie Schwab: Okay, here are couple of must not do’s.

Never have more than 20% of an individual stock or industry in your portfolio. You are taking on too much risk and those of us who work for the large corporation and we get the companies stock, we get very close in intimate with that stock and we have a very hard time paring it back and selling it.

So you think about employees at Enron or World Com. Unfortunately they were so well with that stock, but the stock and the company weren’t well to them. So, don’t take kind of risk. Just to have no more than 20% in your companies stock or any of your favorite stock.

Again, don’t time the market. Don’t getting in and out or let your emotions get in a way of successful investing.

Create that diversified portfolio that reflects your risk tolerance that again your timeframe. Assuming as a good solid portfolio, you should be able to arrive the ups and down of the market.

Today with sub prime market and lot of people are very scared right now, but we have had these down markets historically many times, since the beginning of the stock market it’s just part of the make up of it.


Recorded on: March 27, 2008