SM: How Much Apple Stock Is Too Much?

Like many Apple (AAPL) fanboys (and fangirls), David Howard owns an iPhone, iPod and an iPad -- not to mention a sizable chunk of the company's shares, which comprise about 25% of his portfolio. And the Austin-based mechanical engineer would like to add to his investment, but his financial adviser is trying to talk him out of it.

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"Everything suggests it's going to keep running," Mr. Howard says, lamenting that his adviser "doesn't like the risk of so much in one stock."

It is a message many financial advisers are preaching, even if clients don't want to hear it. Some say they have had clients who rarely comment on portfolio strategies call to complain when an adviser sold Apple shares.

"It's a battle," says Kevin Ashworth, director of investments for EP Wealth, which oversees $1.1 billion in assets in Torrance, Calif. "But rebalancing is just prudent."

Amid the near unconditional love from analysts and fund managers for the world's most valuable company -- and the consumers who adore all-things Apple -- some financial advisers are questioning how much of a good thing is too much. They say many of their clients are overloaded with Apple shares, not just through individual stock but also through other holdings as fund managers have piled in.

Following Apple's 50% rise just this year, some advisers are simply selling shares and taking some profits. Others are getting more creative, looking for cheaper ways to play Apple-mania or to hedge their bets.

Michael Church, who heads financial-advisory firm Addison Capital, which oversees $500 million, is putting money into stocks that benefit from some of the same macro trends as Apple. Qualcomm (QCOM), for example, also stands to profit from the increased use of smartphones world-wide.

Another option, says Robert Grey, head of financial- advisory firm Denver Money Manager, is to buy shares of a Nasdaq exchange-traded fund. Apple currently makes up almost one-fifth of the Powershares QQQ, but investors also get to own other tech heavyweights like Cisco (CSCO) and Broadcom (US) by owning the ETF. "Apple is really about a whole new product cycle and a lot of companies are riding its coattails," says Mr. Grey, whose firm manages $106 million in assets.

To be sure, most investing pros -- including the advisers trimming shares -- remain big believers in Apple's long-term growth prospects. Plus, the company's decision last week to begin paying a dividend of $2.65 a share arguably makes the stock even more attractive to long-term investors and retirees.

But the problem, pros say, is that clients' growing positions in Apple means less-diversified portfolios. One of the enduring lessons from the bursting of both the tech and housing bubbles last decade is the danger of not spreading your bets. For that reason, Kenny Landgraf, head of Kenjol Capital Management, recommends clients trim positions in Apple to no more than 10% of their portfolios. When everyone is "drinking the Kool-Aid" and watching their portfolios rise, Mr. Landgraf says, "it's hard for clients to decide how much is too much."

Some money managers are playing stronger defense. Joseph Doyle, a financial adviser at Morris Capital Advisors, cut clients' Apple holdings late last year to about 4.5% and used the proceeds to buy rivals such as Google (GOOG) and Microsoft (MSFT) . He's not putting any new money into Apple at the moment.

"Nothing, including Apple, goes on forever," says Mr. Doyle, whose firm oversees $200 million in assets.