I got this question the other day from a reader who was interested in the special situation forming with shares of Bershire Hathaway (NYSE:BRK.B):

Excellent Artitcle. I am seriously considering your advice to purchase a share before the split takes place. It would replace all of my current holdings in my Roth IRA stock trading account.

Normally, an investor trying to replace an entire portfolio with one stock is the biggest red flag imaginable. After all, diversification is the name of the game when it comes to retirement accounts like IRAs and 401(k)s. But what about a conglomerate like Berkshire… Do the same rules apply?

Ultimately, while Berkshire Hathaway is a great stock with a well-diversified portfolio of subsidiaries, I’d strongly urge investors not to liquidate all of their other holdings to buy shares of the company. That’s because while Berkshire does have some good diversification, Buffett’s self-avowed strategy is to avoid stocks he doesn’t understand. That’s translated into an underrepresentation of tech names, incidentally one of the sectors that led us out of 2008’s mess the fastest.

Now that Berkshire’s B shares have split, you can pick up a position without wiping out your exposure to areas that the company doesn’t play with.

For a more in-depth explanation of diversification and asset allocation, check out this article I wrote back in 2007 for TheStreet.com.