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There are plenty of articles explaining how to install OS X on a separate partition of your Mac’s internal drive and how to install it onto an external drive using a single partition. However, it’s not clear to me whether it’s possible to install OS X onto a separate partition of an external drive. It’s what I’d like to do, is it possible?

For what it’s worth, my external drive currently has a single 500GB partition, is formatted as “Mac OS Extended (Journaled)” and has a GUID Partition Table. That should make it bootable, right?

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Yes!

As the disk is the correct format, it will show in the disk list in the installer (click Show All Disks). You can install any version of OS X on a partition of the correct format, regardless of where the partition is located.

The OS X installer doesn't partition the disk for you though; do this first in Disk Utility.

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Macs will boot from any connected drive, even remote volumes over a network. The installer will therefore put it's product on any connected drive with a compatible file format (and offer to reformat it if not).

An 8Gb USB thumb drive is commonly used by IT departments and technicians to service a mis-behaving machine, but at that size your content is severely restricted - the techs usually don't care.

Standard, 2.5inch external drives are painfully slow if you try to run it as a regular Mac. You won't have any "problems" other than poor performance. FireWire 800 is almost normal, an external Thunderbolt case will be just as fast as an internal drive.

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