Being faithful to your "one and only" may be important for romance, but it could be the kiss of death when it comes to investing. If your portfolio consists mainly of one stock, asset type, or industry, you could be risking your future financial well-being.
Be wary of these investing moves that can land your portfolio on the rocks.
Your Company To Have and To Hold
You may think you work for the greatest company in the world, but holding more than a modest percentage of your portfolio in your employer’s stock can be risky. If company profits take a tumble, company stock values will tumble along with them. Having most or all of your portfolio invested in your employer’s stock may mean you could be left with little or nothing to show for years of saving, should the company falter.
All for Love
Remember the tech stock bubble? Remember the tech stock bubble bursting? If your investments are concentrated in a single industry — even if they’re spread among several different companies — your portfolio is vulnerable if that industry tanks. The same holds true if all your investments are focused on one particular market sector — large-cap stocks, for instance.
Three’s a Crowd?
Because they hold many different investments, mutual funds offer automatic diversification.* But holding two or more funds with the same investment style and objective won’t give you the diversification you need. To have a truly diversified portfolio, invest in mutual funds that represent different market sectors and asset types.
*Diversification does not guarantee against a loss or assure a profit, and there is no guarantee that a diversified portfolio will outperform a non-diversified portfolio.
Close Window