Single stock Investment – A blessing or a curse

Risks and stock investing are the two different sides of the same coin, but to those who are initiated, minimizing those risks is easier than doubling a 5-figure number. Even you can become one of them if you know the nitty-gritty of investment; if you are unsure about the returns, an aid from a professional accountant can set your deals right. So learn to navigate around the pitfalls and maximize the profits, but before you do so, collect all information that’s necessary for stock investing.

  • Is it wrong to hold a single stock for a long time?

First thing first, you must not stay 100 percent invested all the time. This is because stock investing requires understanding the stocks in your choice list and also the reasons that are forcing you (or not) to invest. But what if you want to shun the rest and only seem interested in a particular stock? It’s the same theory that applies; you need to understand the stock. This is more because while a diversified portfolio translates to a reduced risk (it spreads your money over a vast range), putting all the money on a single stock – how much ever hot it may seem – is putting all the odds tremendously against your strategies and expectations. Thus, for doing the same, you need to be a real expert on that particular company and the money you put there should be an amount you won’t regret losing.

  • Unwritten norms of stock investments

Thus, to make you play safe in the stock investing arena, we advise not putting your entire money in stocks from the same industry. If the particular industry goes down, so shall your entire portfolio, but if you are a veteran in investments and an expert, then do so after taking adequate precautions. A safe way to do the same is by keeping a maximum of 20 percent of your entire investment capital in a single stock. However, if the stock belongs to a company serving food, energy or any other consumer necessities, then the chances for running into a loss goes down by a great deal.

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One Response

  1. This is really great advice, especially in light of what is happening on Wall Street right now. I work on a wealth management team at Vitale Caturano in Boston (www.vitale.com) and agree with you that minimizing risk is easy and also essential right now. You’re advice not to put all of your money in stocks in the same industry is great too.

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