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Max1m0 said: "im doing a SMS, and i have seen servel news reports saying the whole oil shortage is over. i have tons of oil stock. should i sell all of them? are hang on to them"

Max1m0 said: "basically, should i sell all my oil stock, or hang on to it?"

InvestorMan said: "[SIZE=3][FONT=Verdana]That's a slippery subject.[/FONT][/SIZE]"

Max1m0 said: "my whole portfolio is mostly oil."

LanceJ said: "[QUOTE=Max1m0]my whole portfolio is mostly oil.[/QUOTE] You know the answer to that, that's why you posted your question. Yes, your portfolio diversification is terrible if you are overweighted in oil and sooner or later, if you don't correct this overweighting, you will suffer. You should have never allowed your portfolio to get to a point where "my whole portfolio is mostly oil", and deep down, you know this and that's why you posted your question asking for help. So how do you fix it? Diversify. I have a bad feeling that investors who are overweighted in a specific sector like you are going to get crushed in the next bear market we go into. Remember, diversification is longevity. You want to live to see another day and not get knocked out of the game. I recommend a crouching tiger posture against our inflation opponent, complete with the matrix hand "bring it on" movement. Let's see how hard he comes at us, it'll give us a better idea of his weaknesses and how better to exploit it. We don't want to go rushing off and selling everything, but at the same time, we don't want to be overweighted in any one sector. I also recommend you consider a position in Gold with up to 20% of your portfolio, but certainly nothing less than 10%. An excellent Gold play where the underlying company should be able to grow faster than inflation is GG (see the Sticky Six message thread for details), but several other such Gold mining companies will do, or directly investing in the price of Gold itself will do. So in summary. Yes. You need to diversify your portfolio and reduce your overweighting in oil. You should also consider investing in Gold with about 20% of your portfolio (to protect your downside as a hedge against inflation) either in Gold mining companies like GG, or other companies tied directly to the price of Gold, or Gold itself. New Investors Energy is the most serious inflationary pressure we face(as the cost to produce a product goes up, so does the price the product must be sold at). As inflation rises, earnings are artificially inflated causing P/E ratios to drop across entire sectors. When you see A LOT of companies with low P/Es but the stock in these companies continues to falter for no apparent reason, it is a sign that we are in inflationary times, so be watchful for it and don't get sucked into a company just because it seems to have a low P/E ratio. You will have to rely less on the P/E multiple as inflation rises (but only for a time being until the market establishes new industry avg P/Es for comparable analysis). Another inflationary pressure is Hurricane Katrina, causing the government to print more money, making each dollar you hold a little less valuable..aka dificit spending. Another inflationary pressure is the war in Iraq, again, dificit spending. Another inflationary pressure is Hurricane Rita. Another pressure is that President Bush lowered taxes. While this spurs economic growth, President Bush did not have a crystal ball and did not forsee Hurricane Katrina and the estimated 20 billion price tag. Had he a crystal ball and known about this coming expense, he would have budgeted for it. That is why Greenspan continues to raise the prime lending rate to battle inflation. Investors get angry and say, don't raise it again Mr. Greenspan! It hurts the stock market! But Greenspan must combat inflation."

HappyHarry said: "Don't put all your money in one sector. It pays to remind ourselves of simple advice."