Oversize Positions Don't Worry Me -- YET!

[hendi_alex]

For a dividend investor, IMO, the main risk that needs to be mitigated is company specific risk. During the past few meltdowns, there have few safe havens in terms of loss of principal value. Most all equities and preferred issues were brutalized. I generally cap any single company exposure to 10% and any single sector exposure to 20%, as a loose guideline. As long as company fundamentals hold and as long as the dividend payout is maintained and is usually growing, then the valuation will take care of itself over time. Steep drops in price that are not related to fundamentals, IMO are just buying opportunities. In my newly funded IRA, I am using equal weighting for now, while building positions. After the desired breadth of equities is achieved, I'll probably start doubling some of the positions, and over time will re-balance up to the new 2X weighting. The positions will likely be held as long as current market yield and dividend coverage remain favorable. To me, yield against purchase price is a meaningless metric.