Keeping a well-diversified portfolio and understanding levels of risk tolerance are key to accomplishing investment goals and objectives over the long term, says Don Reilly, Chief Executive Officer and Co-Founder of Reilly Financial Advisors.
“You have to stay diversified, and you have to keep that discipline to stay diversified, even if you’ve got one stock in there that’s really hot, you can’t be tempted to switch more money into that, simply because then you’re going beyond the risk that you originally wanted or need,” he said.
Reilly says his firm’s portfolio is approximately 20% in large growth, 20% in large value, about 10% in the small cap and 10% in medium, with international at about 15%, and cash roughly at 3% or 4%. He says the portfolio is broken down by asset class, and then within each class he has eight to 10 stocks of individual companies.
“We’ll never have more than approximately 2% to 2.5% of the portfolio in any one stock, ever. If it goes up a lot and gets way above that, we’ll cut back on it. That way you have a well-diversified portfolio; you have limited risk with each company that you own, and you will benefit,” Reilly said.
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