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The key principles of diversification as outlined in The Intelligent Investor are:
1. Adequate diversification: An investor should have a minimum of ten stocks and a maximum of 30 to avoid overexposure to a single industry.
2. Company selection: Each company selected must be significant, prominent, and conservatively financed.
3. Dividend payments: Each company must have ten years of continuous dividend payments.
4. Investment cost: The investor must not pay more than 25 times the average earnings over seven years and not more than 20 times the average earnings of the last year.
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There should be adequate diversification with a minimum of ten stocks and a maximum of 30. Avoid overexposure to a single industry. Each company selected must be significant, prominent and conservatively financed. Each company must have ten years of continuous dividend payments. The investor must not pay more than 25 times the average earnings over seven years and not more than 20 times the average earnings of the last year.
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This book will not teach you how to beat the market. However, it will teach you how to reduce risk, protect your capital from loss and reliably genera...
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