I heard a story this week about a man rolling over his $200,000 company 401k into an IRA and he wanted to put it all into a single, high growth stock.
I think most would agree that putting a large chunk of your retirement money into a single stock is risky.
But there are also other ways an investor could become heavily weighted in one company.
The first London Value Investor Conference was held in April 2012 and it has since grown to become the largest gathering of Value Investors in Europe, bringing together some of the best investors every year. At this year’s conference, held on May 19th, Simon Brewer, the former CIO of Morgan Stanley and Senior Adviser to Read More
Many employees of companies that have Employee Stock Purchase Plans also can be overweight in one stock because they get a discount for buying the company stock so they keep buying every month. Eventually, that position dwarfs every thing else in their portfolio.
But if one stock is too few, how many is too many?
Some investors own 50 or 60 stocks which risks turning their portfolio into a pseudo-mutual fund. Even if you manage to land a few big winners they are such a small percentage of your overall portfolio that they hardly cause much of a boost in your returns.
If owning one stock is too risky, how many stocks SHOULD you own in your portfolio in order to have diversity and spread the risk?
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