how much to diversify?

Hi Friends,

I am considering to invest in a few companies. I am currently in the process of narrowing down stocks. I am doing a top-down analysis. I have a question with regard to sector diversification. My question is - how many sectors should I diversify myself in? Like should I restrict to 3 sectors or 4 sectors etc. Pls guide on this. Thanks

Karuna

1. Never put all your eggs in one basket ( NSE ADVERT ON TV EVERYDAY)

2. Allocate 25% of your capital in different sector's now as Nifty may be consolidating right now and you may see more lows. Keep Investing remaining at your comfort.

3. Pick sector's which you expect can give good return's. Don't pick sectors which are prone to govt policies such as sugar etc. GOOD CASH FLOWS (most important)

4. Check Balance sheet of companies which give constant dividends in past 5 years. Chances are they will keep giving dividend's in future. Good and strong Balance sheet. PE and Book Value.

Good Banks
TOP FMCG
IT
AUTO

These sectors at present are doing better then others.

I hope this helps.

Regards
Narangji

PS: As per my opinion only invest in companies with sound managment, usually Large caps. 2 things u will see in time

1. Large caps are more transparent and chances are that your capital will recover more quickly

2. Less likely chance of getting your capital wiped out.