Over the past several decades, people on Wall Street have preached the virtues of stock diversification, drilling it into the minds of every investor within earshot. Even stock market beginners or dummies have heard about diversification. Everyone from the CEO to the delivery boy knows that you shouldn't keep all your eggs in one basket - but there's much more to it than that. You shouldn't go on financial tips need to diversify and study your options.

The concept of "don't put all your eggs in one basket" is a wise one for those who are unable or unwilling to evaluate the attractiveness of investment opportunities. But as it happens, excessive diversification presents a serious hurdle to wealth building.

There undoubtedly is less risk in holding a concentrated portfolio of well researched investments than holding so many stocks your returns are bound to be nothing more than average. The ideal portfolio size, depending on your net wealth, may be between 5 and 20 stocks. It is better to have a smaller group of well researched and understood stocks than it is to have a sizable laundry list of all the popular companies. For it is much easier to find 5 exceptional opportunities than 25.


This stock market for dummies lesson is about averaging down.

If a stock you have invested in falls in price you have a few options...
You can panic and sell out, hold onto your investment waiting for the stock to rebound, or buy more stock at the now lower prices. The latter is a strategy known as "Averaging Down" because it will bring the average price of your investment down.

It works like this: you buy 100 shares at $100 a share, the price falls to $80 a share and you then buy another 1000 shares which brings your average cost down to $90.

Is this a good strategy?...
It's a bad strategy if the price has dropped because the fundamentals of the company have changed to a significant degree and the stock is now unattractively priced or it was simply a bad investment in the first place.

But if your initial investment was based on sound research and understanding of the company and the fundamentals of the company haven't significantly changed for the worse then it is the best strategy to take. Because if it was good at $100 it's great at $90.

Inbox Stocks - Is This Another Scam?

WHAT CAN YOU EXPECT WITH INBOX STOCKS? I AM GOING TO FIND OUT, AS I DO THIS INBOX STOCKS REVIEW OF THE FREE OFFER. I've just signed up at Inbox Stocks for an interesting free trial offer. You'll be able to type in your name and email address and then, for the next 4 weeks after, you'll receive one free stock pick per week. You can watch along to see if this guy and his service is worth the cost. You will be able to watch live, each week, as his actual stock picks almost double. (he says)

He also claims that his stocks can often rise over 100% within a matter of days. He claims that you can take advantage of a pattern everyday within the first 45 minutes of the stock market's open. This only works for OTC stocks (over the counter).

If you are looking for information about stocks for beginners this might not be great for you as it might be too advanced. Also, this could be a scam but it is free to sign up so I am going to give it a try. Again, that's Inbox Stocks if you want to give it a try. I like stuff that is for free and maybe it will at least give me an investing idea or two.

6/20/2008 UPDATE

Here is what has happened so far. I signed up by just giving my name and email and then I immediately got the following letter sent to my email:

"Recently when you read my website ( and you decided to subscribe to my newsletter - You took a chance.

I admire that... And... I intend to do everything within my power to make this the best investment you will ever make.

My newsletter is a labor of love. I slave over it like you wouldn't believe.

I want my newsletter to be... by far... the most valuable penny stock investment publication in the entire world.

And so far, I've delivered one penny stock pick per week and have achieved an average 84.795 gain.

This has allowed my subscribers to almost double any money they invest... each and every week!
You should receive your first stock pick, within the next 7days or so... And so that you're ready to take advantage of it, I'll explain the process:

The night before the stock pick, you'll receive what I calla "warning email". This is usually sent at the time the market closes and will explain a little about the pick.

The next morning, roughly 20 minutes prior to the market opening, you'll receive the stock pick.
The "stock pick" always lists vital information, such as the stocks ticker and corporate website at the top of the email.

... The pick however will also be a full report on the reasons I chose the stock, and a background on the company."

That is most of the first letter I got and I am now awaiting the first stock pick. I will never reveal what the stock pick is (that would not be fair as you should do the Inbox Stocks free sign up to get it) but I will tell you what transpires and give you my opinion of the service. I will update this when I have more news.

6/23/08 Update

I got an email this morning from Inbox Stocks but no stock picks yet. The email explained a little about Dave's thoughts on investing but nothing of any real substance.


I have had no further emails for Inbox Stocks. I'm still waiting for the first pick. It's a good thing the sign up is free because not much is going on so far.


Unfortunately, I was on vacation when David released his first stock pick. He released it on Monday morning and claims it was at .36 then. HOWEVER, the stock he picked did not open at .36 but at .48! It did briefly hit .61 and if you had sold it at that instant you would have made a nice gain. However, the stock closed the week at .49 for a total gain for the week of ONE CENT.
This looks to be something that you have to stay glued to your computer for and perhaps sell the instant you have a gain you are happy with. This is definitely not long term value investing. His new email says a new pick will be out next week so I will update then.


The next stock has just been emailed to me and guess what? It is the SAME stock as he picked last time in July. That's right, the same stock as I guess it has since gone back down to it's prior level and now it is David's pick again!