Investing 101: Why Portfolio Diversification Is Always A Good Idea | Freeman Capital

Diversity > One Favorite Stock

We’ve been preaching not to get sucked into buying single company stock. This week showed us why that is not a good idea, despite what your friends’ are saying about their Robinhood accounts.

If you were paying attention this week, there was a massive pullback (I e. losing) in stocks from September 3-5, especially in those tech stocks that everyone is talking about. The Nasdaq lost over 3% alongside Apple, and Amazon, and if you bought late into Tesla or Microsoft, you lost about 5.5-6.5% for the week.

That is what we call company-specific risk. Thankfully, it can be diversified away – it wouldn’t be a big deal in your portfolio if these 4 stocks only represented say, 5% of your portfolio. You might not even notice the change. That’s what investing is all about, keeping your chips in many baskets, so no one chip is too important.

How You Can Do This

Look, these are strong, well-run companies. And clearly, they are pandemic winners. But you need to listen to more than just your WhatsApp friend’s stories about making crazy money in the stock market – they were probably not too happy this week, and they were also probably much quieter. No one brags about losses.

But losses are important, and a huge part of investing in risky assets. Prepare for pullbacks, don’t react. Let us show you how.

 

Click Get Started” to learn more.

Freeman Capital

Freeman Capital

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