What do the following unrelated companies have in common?
Amazon Apple Bank of Ireland
CRH Dell Eli Lilly
Google Merck Microsoft
Pfizer Smurfit Tesco
Firstly they are all household names and large employers in Ireland whose stock is widely owned by Irish investors. Secondly their stock prices have fallen by at least 70% from high-to-low in the past. Some have fallen >80% more than once.
“Forecasts may tell you a great deal about the forecaster, they tell you nothing about the future” – Warren Buffett
We are not predicting that these stocks will suffer such large corrections again, simply that most investors do not have the stomach to ride out large falls. Very often they end up selling at or near the lows. This can have a meaningful impact on education savings, rainy day funds and retirement plans.
Concentrating in one share exposes you to unnecessary risks, perhaps amplified if that company is also your employer.
Investing in capital markets has rewarded long-term investors, but the same is not true of all stocks.
Diversification reduces the impact of any one company’s performance on your wealth. It helps to take the guesswork out of investing, and can help smooth out some of the bumps.
Holding securities across many market segments can help manage overall risk. But diversifying within your home market may not be enough. Global diversification can broaden your investment universe.
How can a Financial Adviser help?
We do not focus on trying to ‘pick winners’ but on factors such as sound asset allocation, global diversification, reasonable cost, tax-efficiency and easy to understand investment strategies. This is combined with analysis and projections of your household cashflow, your financial goals and financial protection for your family. It then gets wrapped up in a regularly reviewed and documented financial plan.
Take a look at our Financial Planning page here
Ardbrack Financial Limited
The content of this article is for general information purposes only. It does not constitute tax or investment advice as it does not take into account the investment objectives, knowledge and experience or financial situation of any particular person or persons. You are advised to obtain professional tax and investment advice suitable to your own individual circumstances. Ardbrack Financial Limited makes no representations as to the accuracy; validity or completeness of the information contained herein and will not be held liable for any errors or omissions.
Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful. Diversification neither assures a profit nor guarantees against loss in a declining market.
Ardbrack Financial Ltd is regulated by the Central Bank of Ireland