Other way of diversification

Besides having stocks in different market cap, I also try to have stocks in different country.  This way I don't depend all my stocks in a single country's economy.  I divide stocks into different continents to help tracking the stock easier.  

Here are how my stocks are distributed among the continents:

• North America: 58.62%
• Asia: 7.74%
• Europe: 33.64%

Typically in North America and Europe there are more developed nations so I try to leave most of my eggs there while still have a little bit of my stock in Asia so I also have some of my investment in emerging market.

More on diversified portfolio

Now that I have at least one stock in every sector, the next thing to check is the market cap. Typically large cap stock doesn't move as drastically as small cap stock so it is a good idea to keep a good mix of stocks in all caps. I also have stocks in micro-cap which is more risky yet would probably yield more return.

Here are the percentage distribution of my holding for different caps.

• Large Cap: 26.64%
• Mid Cap: 21.8%
• Small Cap: 25.96%
• Micro Cap: 31.41%
  

All area covered

To make my portfolio diversified, I added more stocks so that now I have all the sector covered. Today all my stocks did well because of the huge rally. Below are my choices of the stocks and the sectors.

• Basic Material: AK Steel Holding(AKS)
• Capital Goods: Trinity Industry(TRN)
• Conglomerates: General Electric(GE)
• Consumer Cyclical: Ford(F)
  
• Consumer Non-Cyclical: Dr. Pepper Snapple(DPS)
• Energy: Petrobras Energia Parcipaciones(PZE)
• Financial: US Bancorp(USB)
• Healthcare: China Medical Technologies(CMED)
• Service: Office Depot(ODP)
• Technology: Taser International(TASR)
  
• Transportation: Dryships(DRYS)
• Utilities: A-Power Energy Generation System(APWR)
  

My Portfolio 3-9-2009

My current investment strategy in this challenging market is diversification. To make sure I get myself covered at all grounds, I try to pick one stock in every sector. And today even though most major indices are down at least 1%, I actually managed to get my portfolio up about 4.87%. Below are my choices of the stocks at the moment.

• Basic Material: AKS
• Healthcare: CMED
  
• Transportation: DRYS
• Consumer Cyclical: F
• Capital Goods: TRN
• Conglomerates: GE
• Service: SIRI
• Technology: TASR
• Financial: USB

About My Stocks

Successful investment is all about minizing risk. One way to do it is to focus on a few company and study thoroughly. Other way to do it is to diversify and buy stock in different industry and caps. Or one safer way to do it is to let the professionals pick the stock for you - mutual fund. It is probably hard to picture how diversify I am by just looking at the symbols so let's look at more detail of each stock I have.

• ACM: AECOM Technology is an US based architectural and engineering design company involving in projects in highways, airports, bridges, mass transit systems, government and commercial buildings.
• ALY: Allis-Chalmers Energy based in US provides rental equipments for oil company.
• CHNR: China Natural Resources is a Chinese mining company of zinc, iron, and other minerals.
• CPST: US based Capstone Turbine builds microturbines which are used as generators for hybrid electric vehicle.
• DAR: US based Darling International collects animal by-products such as hides and converts them into useable oils and proteins for agricultural, leather, and oleo-chemical industries.
• DIS: If you don't know what kind of company Walt Disney is, ask your 5 year old kid who seats in front of tv watching Disney channel everyday.
• FEED: China based AgFeed Industries makes and sells feeds for poultry, cattle and pigs.
• GRO: The Chinese agricultural company Agria offers corn seeds, sheep breeding products, and seedling products.
• HNP: Huaneng Power International provides electric utilities in China
• JPM: JPMorgan is the top financial conglomerate in United States.
• LUV: Southwest Airlines is probably the only US based airline company that's still making money.
• NSM: National Semiconductor is one of the top US semiconductor maker.
• SDA: Brazil based Sadia sells processed frozen meat products in Brazil.
• SHI: China based Sinopec Shanghai Petrochemical processes crude oil into synthetic fibers, resins and plastics, intermediate petrochemical products, and petroleum products
• SOLF: Solarfun Power Holdings makes and sells Solar cells.
• VIP: Russia based Vimpel-Communications provides wireless telecommunication service.

Investment Mistake #3 - Buy High Sell Low

I know. It is really a stupid idea. Because in order to make money from stock we need to buy low and sell high instead. Unfortunately to some investors including myself, buying stock at high and selling at low is what we end up doing most of the time. So why are people doing such a stupid thing?

This is how it happened. Let's say you saw a stock going up 20% in one day. So will you buy it or not? Maybe not because you know it's up way too much in one day and will come down the next day.

So day 2 comes and the stock went up another 20%. Tempted? But the logical side of your mind says it is too risky because the stock has gone up too much too quickly.

Day 3 the stock accelerated and went up 50% in one day and then you hear your friend taking about how smart he is making money with the stock. And there is a battle starting in your brain now.

Day 4 you make the decision that if the stock goes up then you are jumping in. The market opens and the stock went up another 10%. You hit the "Buy" trigger and feel a little worried but frustrated too that you missed the golden opportunity. And by the end of the day the stock finished up another 10% and you are so excited about how smart you are picking the stock.

Day 5 and thing begin to turn south on profit taking. Stock down 10%. Not too worry you think because it is just back to where you were and it will sure come back.

Day 6 the drop accelerated and the stock is down 20%. You say to yourself it is down the second day and shouldn't go down any further.

Day 7 another 20% drop. You feel so ashamed and don't want to admit "mistake" you made. So you say "forget it, I'm going for Long position... it should eventually come back".

After one year the day you bought the stock happens to be the all time high of the stock and you have lose so much money on the stock that you finally pull the sell trigger and never look back at the stock again.

So sounds familiar?

Results of Black Friday - June 6

Things couldn't get any worse than Friday. With bad job report and spiking oil price, major indices dropped 3% on average making the worse drop for the month. Here is how my portfolio did compare to the market:

Dow 3.13%
Nasdaq 2.96%
S&P 500 3.09%
Wilshire 5000 2.9%
My Portfolio 2.26%

Yes I did beat the major indices by almost 1% on Friday. However I was still not happy with the result as it is still a 2% drop.

Symbol(Gain/Loss)
ABB(2.97%)
ACM(1.89%)
AIXG(1.12%)
AIXG(3.85%)
BRCM(4.8%)
CPST(3.46%)
DAR(2.17%)
DIS(4.29%)
END(11.63%)
GTE(0.17%)
HNP(6.55%)
LMNX(5.22%)
NRF(2.69%)
NVDA(3.18%)
SDA(5.21%)
SOLF(2.35%)
XIDE(1.1%)

Fortunately END the oil driller benefit from the spiking oil price and gained 11.63% on the day and offset part of my heavy losses from stocks such as DIS, HNP, LMNX and SDA. A surprise come from battery maker XIDE which actually gained 1.1%.