Major Risk Investors Ignore

Major Risk Investors Ignore

3 3 i can come from an employer usually the case or come from a family member or an inheritance and what happens is this the usually starts off in a very.

Rational and objective way you start accumulating your company stock you're a your employer.

Are you placing.

But over time and ideally that position right in in at some point becomes a large portion relative to your overall network imposes.

Riding different risks so typically these people in the company for a while they're very familiar day from a trusted they they know the past successes in the future plans they're really in tune with the c.

Suite either in the c.

Suite for example.

So it tends to.

I feel for them at least more.

Than not to sell stock right so what what what happens they're all guest.

Array that are.

In under my the wall luck the- so it comes the others of the tree.

It can get messy look we're human we tend to make the most ration decisions.

With our money- so it's a tough conversation happens really necessary one is why our clients work with us.

Here's the reality in this is a quote from northern trust most individual stocks carry a level of risk that is both i'm compensated.

In diversified.

What that means is that the risk.

Scenario based upside.

And it can be easily away.

In fact.

They look at stocks in the russell thousand.

Ninety eight was of the u.

S.

Market.

And what they can was that the new.

So not only carried three times the amount of risk.

As the index but also.

So you were taking on excess risk of not achieving all that return over the lifetime of the- stock's performance all this is a subset of over thirteen thousand stocks.

Over thirty years so it's a lot of data.

They also found that over 40% of all stocks so big permanent catastrophic loss in excess of seventy percent.

So obviously because this can have a huge detriment to your future financial plans.

What we see as the unemotional third party- or instances of course greed fear most most heists you inherited position for example.

Then there's tax avoidance that comes into the fold- in the sunk cost fallacy which i think is really relevant here with our exposure to the energy sector.

What i really want people to understand is that this isn't an all or none.

You simply need to establish a disciplined process reducing your exposure over time- and find ways to mitigate.

That tax will impact as you go and in the end you still may want to keep save 85% of your portfolio when that one company and you know.

85% is a lot for some people.

But it's also significantly better than they did twenty thirty or forty percent.

All right all right so just remember that.

Diversification.

It's likely to undermine those long term goals a lot of my clients had.

Their goals are to own a lot.

Exxon or a lot of apple.

It's nice at times but the goal is really to take care of their family right travel more skin not to worry about running