The Straight Dope On Diversification

I recently received this comment and question from reader “DB”, and once I saw that my response had crossed the 1,000 word threshold, I decided it was worthy of its own post. The question is about why it can be inadvisable to jump into the market all at once upon receiving some kind of windfall. Specifically, here is what DB had to say:

“Hello Tim – Thanks for this article! I like your writing style. I am just now constructing a dividend portfolio and it has been quite the learning process. I am wondering if you can address a question I have on building the portfolio regarding actually making purchases. I have seen a few authors caution the new dividend investor to not buy all your stock picks at once but to make the transition over time. Why is this? I assume the authors are telling us to identify the stocks we want to purchase and then wait for the appropriate entry price? Although I understand the share price is important and I do try to find value, If I am buying a quality company for a long-term position how important is share price?

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