Posted on June 12, 2008 by Christian Castillo

When I started equity investing, I would always come in 100 percent or all-in in one particular stock. Now, given that the particular stock grows, then my investment will surely end up with a high return. But in some instances I had to cut my losses painfully, just so to prevent further eating up my capital.

The old adage tells us not to put all your eggs in one basket. In other words, there is a need to diversify your portfolio. Several factors come in:

1. The aggressiveness of your portfolio or the absence of it must reflect your age. The younger you are, the riskier your portfolio may be.
2. Your risk tolerance will also apply. Whether you can stomach daily paper losses or you are satisfied with small returns offering low risks.