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Hey Sylvia, Quick Question: How Much of One Stock is Too Much of One Stock? (Video)

By Sylvia Kwan

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

© 2019 Ellevest, Inc. All Rights Reserved.

Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives, provide you with a given level of income or reduce portfolio risk.

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities, and should not be considered specific legal, investment, or tax advice.

The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific person.

Investing entails risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.

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Sylvia Kwan

Sylvia is the Chief Investment Officer of Ellevest. She researches and oversees Ellevest portfolios and develops the algorithms behind Ellevest’s investment recommendations.