A good friend, Mr. Jackson, asked me how he could invest his savings into Tesla stock so I told him I would write an article on his behalf explaining the importance of diversification.
Don’t get me wrong taking single stock risks is a great way to obtain excess returns in the market. You shouldn’t expose yourself to single stock risk until you have a well diversified portfolio.
For most people a portfolio of 80% equities and 20% bonds will do just fine over a long period of time. The best thing is you can do all of this yourself. All you need is a Fidelity Investment account that you regularly put money into. After opening the account you can allocate money accordingly.
Once you have an account and a well diversified portfolio, single stock risk is something you can consider if you’re a risk taker. However, single stock risk is much like gambling – it has its ups and downs.
The bottomline is it is much easier to set it and forget it when it comes to investing. Keeping tabs on your single stock investments is a challenge, especially when you don’t keep track of markets on a daily basis. Plus you don’t want to be like this guy: https://www.youtube.com/watch?v=eU4jTS–c_A
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