Diversify

 Wednesday, June 28th

I have decided to continue diversifying before increasing holdings.  After much research, I found that many recommend what seekingalpha.com recommends:

"Maximum Stock Position (3-5% of total portfolio) - We believe that a diversified dividend portfolio should include at least 20-30 high-quality dividend stocks, with no stock accounting for more than 5% of the total portfolio."

Half of my portfolio today has a weight 5-10%, so I need to purchase more just to balance that out.  Plus, YD has 39 different stocks at last count, and I'm at 15.  Therefore, I need to definitely diversify more to get to at least 30.  I'm not too concerned at this point, as he was only at 10 at July of '14, so I figure I'm a bit ahead of the game.  YD also has three of his 39 stocks weighted at 5.58%/6.74% /13.97% - JNJ, PM, & Altria respectively. 

I am considering selling some or all of my GLT stock to help diversify.  GLT's P/E is currently over 50, with a beta of 1.9, so it is volatile at the moment.  Advisors have it at a moderate buy/long hold.  GLT is currently earning me $40 a year with 80 shares in.  I've had a 20% gain in it over the 10 years I've held it - selling it would net me 5 years of dividends at once to reinvest into two other stocks.  I'll see what happens on the ex-dividend date (tomorrow), after I qualify for my quarterly $10.

Seekingalpha's next rule for Asset Allocation:

"Maximum Industry Position (15-20% of total portfolio) - Ideally, a long-term Dividend Portfolio should include stocks from a variety of industries. However, under no circumstances should one specific industry or sector account for over 20% of the total portfolio."

I think I am on track for this, currently.  I notice YD doesn't follow this too closely, holding 44% in staples (he's a fan of the non-cyclical consumer market - for good reasons).  I think if I'm going to have a sector at or above 20%, it should be that.  I still own no tech stocks, other than health tech, which is probably a good thing right now.

And their third rule:

"Maximum Portfolio Beta (less than 1.0) - We believe that low beta dividend stocks offer investors the best long-term risk-adjusted yields. As such, we suggest a weighted-average beta of less than 1.0 for a long-term Dividend Portfolio. Generally speaking, low beta stocks tend to dampen overall portfolio volatility. It's ok to have some higher beta names in the portfolio, but make sure your average is less than 1.0."

My dividend stock beta average is 0.67 (non-weighted), the highest being GLT at 1.9 :( it is easily looking to be the most volatile of my stocks, and of course puts it high on the chopping block.  Selling it and turning it into 2 other less volatile dividend stocks will be difficult not to do.  I  may run the numbers and see if I can do it while still maintaining the $40 a year return tomorrow.

Everything else in my portfolio looks good.  It is interesting to see other's opinions and ideas of what you should/should not do, but diversifying definitely seems like the way to go, followed by even weighting.  You want to have each of your nest eggs in a different basket, in the hopes that losing one egg will be offset by the production of more eggs in a different basket.  The beta/PE analysis decisions I am still researching.  So far the only benefit I see to that is that everyone else is doing it, so you want to bet on the institutional investments, but pulling out before they do seems chancy.