drkohler said:
ok.. there is a guy who seems to want to put ALL his free money into a single share and you advise.. To start with, if you really were a business analyst, you'd tell him that "putting all one's eggs into a single basket" (or whatever the correct term ist in english) is a complete no-no in every business school I know of... |
I know plenty of people who put their eggs all in one basket.... The reality is you are gambling. Some call it by different names but that is what it is. If you spread your money out then most of the time losses in some of your investments will be countered by gains in another. Meaning there is a high chance of breaking even. If you have it in just one then your either lose money or gain more money then you invested. You don't play the market by following a "have to spread the investments" rule. Its like betting on a horse race. You normally have an amount your ok with losing. You then look at the guide and gain an idea of how the horses have done in recent history. Have a look to see what it has coming up in its future and see what competitors it has. After all that you place your bet on one of those horses. Business is exactly the same. If there is bad news stock falls. If there are good news i.e new product then they rise. If there is a scandal then they fall. If they have things over-shadowing them then there is a further possible fall ahaead. If you say bought a share for £1 now and then next week one of those investigators found something to incriminate Sony which could lead to a multi-million fine then the share could fall further. Next week it could be worth 80p meaning you lost 20% already. Meaning stock needs to then grow again by 20% just to get back to even.
However if you bought your shares when they were at the 80p and after the investigations you stand a higher chance of gains on your investment. A good example of this is the BP incident. Shares fell fast as the investigation loomed and once they got their fine they bottomed out. They went from 80 in 08 to about 22 at the end of the incident in 10. 4 months later and they are at 46 and continue to re-rise. If you bought them at their lowest you would of already have gained 100%, his £5000 would be worth over £10000 now. That is the gamble you take. Having it in various different companies does not lessen that gamble.
