Sylvia Kwan has nearly 35 years in the investing industry, as well as a PhD in engineering economic systems from Stanford, and she helped build Ellevest from the ground up as our Chief Investment Officer. So you could say she knows a thing or two about investing. We decided to bottle up some of that golden knowledge for you in our new video series, “Hey Sylvia, Quick Question.”

Up next: How much of one stock is too much of one stock?

Sylvia’s answer:

Well, at Ellevest, we believe that no more than 10% of your investment portfolio should be in a single company’s stock. Why? Because no one can consistently predict how a particular stock is going to perform in the future. So it’s important not to have too much of one stock in your portfolio.

Let’s say, for example, you had 75% of your portfolio in a single company’s stock. When the stock’s doing well, your portfolio is doing great, you’re feeling great. But what if the stock takes a dive? There’s a bad earnings quarter, there’s a scandal with the CEO, there’s a security breach at the firm. Your portfolio could significantly suffer as a result.

Now let’s say that same stock was only 5% of your portfolio and it takes a dive. Because it’s only 5% of your portfolio, your entire investment portfolio suffers less as a result.

Disclosures