Advisers suggest devoting no more than 5 percent of your portfolio to a single stock. Need confirmation? Think Apple, which was up more than 70 percent for 2012 through September, then fell hard, losing most of its gains for the year.
"Apple ran up so high, just like the whole high-tech index did in the late '90s, that sticking to your target of 5 percent gets out of whack and you find your tech portion becomes 15, 20, 25 percent, maybe even 30 percent of your portfolio," says Jim Holtzman, a financial adviser at Legend Financial Advisors Inc., in Pittsburgh. The 5 percent rule forces you to sell your gains.
"Yes, it's hard to do when you see the stock is still going up significantly," he adds. "But today, you'd be happy you stuck to your own rules."
