I have DRIP's in PFE, GE and BP. Is this a good diversified group of stocks ?

Question

I have DRIP's in PFE, GE and BP. Is this a good diversified group of stocks ?

Answer 1

For you a well diversified mutual fund with a long track record of performance that  beats the market regularly would be a much better and safer investment.  You have all your eggs in to few baskets

Answer 2

They're all in different industries.  But diversification depends on the correlation of their returns.  If they are uncorrelated then its diversified.

Answer 3

No. The beta on three stocks is going to be much higher then the general market. If you're really after diversification buy a market ETF like the S&P Spiders (ticker symbol SPY).

Answer 4

If this is entirely the only things you have for investments, no. However, DRIPs are tough to diversify because each single DRIP you own has their own tax preparation and set-up making it difficult (unless you hold your DRIP through an online broker). If you have other investments other than DRIPs such as Mutual Funds, CDs, Bonds etc., I think your fine. Your choice of GE also gives you an already diversified portfolio as it represents many industries on it's own.

If you are looking for better growth options, suggest buying shares in other companies through a discount broker as DRIPs aren't always available for all companies and allows you to immediately liquidate if things turn sour. Your DRIPs you currently own are very solid blue chip companies and so can act as your safety net over the long term. If (LONG TERM ONLY!!) you'd like another DRIP to consider, I would suggest a financial/bank stock. These are traditionally high dividend paying and give high compounded returns overtime. Also the recent market turmoil gives you an opportunity to take advantage of price.Of course, this should only be long term as I highly doubt great returns over the next year or two. I own a DRIP/DSPP with BAC. The current price gives it a dividend yield of 8% with only a small risk of the company actually cutting the dividend. If they do, it probably won't be as drastic as the likes of C, NCC, or WM and gives a great opportunity for value investors.

Good luck on your investments!