Don't Buy What You Know

Since I spend way too much of my time pining for pricey clothes that I cannot afford, I would buy Gucci, LVMH Moet Hennessy Louis Vuitton and Polo Ralph Lauren. And I, unfortunately, do my banking at Chase, which is part of J.P. Morgan Chase.

Those luxury-clothing companies have done well over the past year. But fashion in still a fickle business and I should not have the bulk of my money tied to one narrow industry. And J.P. Morgan Chase, struggling to shake off its past dealings with Enron, is still facing weak investment banking business.

My portfolio would lack exposure to so many different industries, from technology to health care and energy.

The same might apply to you. And without doing your own hard-core research on each stock you select, you could end up owning the next Kmart or, worse, Boston Chicken.