johnd, Sonki, Brian, re: diversification
The reason is that one can be wrong in ones assessment of an individual investment. Microsoft is an excellent company in which I have substantial holdings, for myself and my relatives. But if Microsoft were to falter or otherwise underperform the general market, these accounts would still likely do well through other equity investments. Even if the general market declined, I would likely continue to do well through other income sources.
I assume you remember the almost universal assessments of IBM until about the mid-1980s, in which it was held with such reverence as an investment that it was almost a sin not to have it as a core holding. Holders of IBM found the value of their holdings cut by roughly two-thirds - it is just recently that the stock again reached the peaks (in nominal/depreciated terms) that it formerly enjoyed.
None of this says you cannot have a substantial investment in Microsoft. If you (we) are correct in the assessment, it will grow greatly, richly rewarding you (us). If not, at least you (we) will likely prosper through other investments.
How weathy is it necessary for one to become, and how quickly and/or surely? What do you expect from your investments?
To me, peace of mind is an important element, together with the prospect of good growth within the bounds of reaonable risk. I therefore do NOT put all my eggs in one basket, no matter how great I may assess that basket to be.
Others obviously do differently, depending on their investment sagacity, tolerance for setbacks and/or happenstance.
BTW, I hold far more Microsoft than I do Intel, in part because of my perception of Intel's volatility.
Best regards,
Arno |
