By Rick Glaze

Many investors find their balance sheets are unusually heavy in a single stock. This can be the result of employer option or retirement programs. While option programs can be very lucrative to the employees of successful companies, a concentrated position can be very good or very bad.

Many professional investors believe the hardest part of stock investing is deciding when to sell. During euphoric periods when a stock doubles, it is hard to sell. But many people in the Bay Area have seen fortunes literally evaporate as stocks retreat from these high prices.

“All your eggs in one basket” only works when it works, if you follow me. Diversification may not be the route to becoming rich, but it may very well be the path to protection of assets. There are no guarantees, but having several baskets in several different areas can insulate a portfolio from sharp dips in value.

At our firm, we watch the correlation among asset classes. That is, if one group zigs, how much do the others zig, or do they zag? If they all make the same move, then the correlation is high and you are not as diversified as you may want to be.

As I have reported in this column, foreign growth company indexes and small-company stocks have vastly outperformed the big-company indexes over the past several years. This is a noncorrelation that your portfolio should have participated in.

Remember, diversifying doesn’t require you to be in everything, just not one thing.

Rick Glaze is the president of Glaze Capital Management Inc. of Los Altos and a registered representative offering securities through First Allied Securities Inc. For more information, call 934-0920.