Buy Pairs of Similar Stocks to Build a Diverse Portfolio

For years I (RAH) have purchased stocks of two similar companies to add variety to my long-term, dividend-reinvestment portfolio. For example, I bought equal dollar amounts of Deere & Company (DE) and Caterpillar (CAT) to give me exposure to heavy equipment. For consumer products I own Colgate-Palmolive (CL) and Procter & Gamble (PG). I have McDonald's (MCD) and Wendy's (WEN) in the fast food industry. I own Heinz (HNZ) and Campbell Soup (CPB) as my prepared food stocks. And I have always liked Pepsico (PEP) and Coca-Cola (KO) in the non-alcoholic beverage group.

It's easy to include pairs of stocks from other industries including banking, mining, technology, telecommunications or any other group that you want to own.

This simplified approach to investing makes it easy to quickly build a core portfolio with a small degree of diversification within a industry and lots of diversity between industries.

Related Articles:

Dividend Reinvestment Portfolio
Stock Pairs Portfolio
Introduction to Portfolio Diversification

Posted December 2, 2007.