May 27, 2016

Stern buys diversification with BASF

After having bought several stocks already, I question whether I’m diversified enough.

My European stock portfolio appears to be quite diversified, with stocks from Switzerland, Germany, France, and the UK, as you can see in the video. I also have several industries in my portfolio. To maintain my diversification, I will avoid the automotive sector since I already own two automotive stocks.

With the exception of the auto industry, there are no other restrictions when choosing from the Obermatt Top 10 stocks for Germany of May 27. I am staying clear of K+S because they were recently sued. I am also passing on E.ON because of their nuclear exposure and because I already own RWE from my first investment season.

The next best stock is BASF, which is on the DAX Top 10 List. BASF makes a lot of sense for a long-term European stock portfolio. I didn’t look any further and bought it.

"Diversify by buying different regions and different industries", is our guiding principle here. More on

Can diversification be that simple? Yes, it can, especially if you want to buy and hold stocks for the long term. For long-term investors, the mathematical models of the investment bankers are irrelevant because they can never predict the future correlations for a long investment period.

And what about Warren Buffet who buys only a few stocks? Well, Buffet plays in a different league. If you are prepared to spend as much time investing as Buffet, go for a small selection of stocks. If you are like me and don’t want to spend more than an hour or so deciding what stock to buy, then diversify - anything else will prove too risky.

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