The final question to ask is how large an investment
to make in the security you're ready to buy. In making this
decision, you'll need to consider the diversification of
your overall portfolio and the degree to which the purchase may
increase your exposure to risk and your potential for a stronger
return.
You can adopt one of a number of different approaches:
Invest the same
dollar amount each time, no matter how many shares of stock,
shares of a fund, or bonds you buy
Buy the same number
of shares or bonds each time
Structure each position
as a certain percentage of your portfolio at the time you
make the trade
No one approach is necessarily better than another. But you run
the risk of creating a much more volatile portfolio than you intend
if you're overweighted in any security or sector, no matter
how smart an investment it seems at the time you make it.
Thomas J. Dorsey, President and
co-founder of Dorsey, Wright &
Associates
Thomas J. Dorsey, President and
co-founder of Dorsey, Wright &
Associates 
