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Ask HN: Should one diversify their stock portfolio

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Re: Ask HN: Should one diversify their stock portfolio

#11
post #4

Depends on what you have in mind when you say diversification. Easiest way to get started in other sectors is to google for stock analysis articles. They are written regularly for the major sectors and they will talk about the biggest/most interesting players, where they stand in the industry terms in recent developments, competitive advantages and risks. With that said, dividing a portfolio across sectors isn't nece…

i would not call cryptocurrencies investing. and i would not recommend it to someone who is just starting / as the question suggest.

Re: Ask HN: Should one diversify their stock portfolio

#12

Just because you come from the tech industry does not mean you know something special about the tech companies, their business prospects, financials and how attractively they are priced.

Another problem with concentrating in the industry in which one works (and even worse - the company for which one works), is that in the event of a downturn, both your job/career and your investments will be hit at the same time. Just when you need your investments the most, they will be worth less than you expected.

Re: Ask HN: Should one diversify their stock portfolio

#14
post #4

Depends on what you have in mind when you say diversification. Easiest way to get started in other sectors is to google for stock analysis articles. They are written regularly for the major sectors and they will talk about the biggest/most interesting players, where they stand in the industry terms in recent developments, competitive advantages and risks. With that said, dividing a portfolio across sectors isn't nece…

i would not call cryptocurrencies investing. and i would not recommend it to someone who is just starting / as the question suggest.

I mean, there's a big difference between not being comfortable with a class of investment vehicles and something not being investing. Any asset whose value has the potential to appreciate can be considered an investment. For example, buying/selling businesses, physical gold, art and even rare pokemon cards are all forms of investment, albeit not mainstream ones. Stocks themselves can be just as speculative as crypto (GME comes to mind).

Besides, the OP is presumably interested in actively learning about the fundamentals of diversification, not merely asking for low-maintenance safe-ish portfolio options (in which case, buying an ETF would suffice). I'm just laying out different options across the entire spectrum. Personally, no one told me about virtually any of these options when I was starting out (presumably because they were similarly making assumptions about my risk tolerance level), but I wish they had. For example, reading about industry sectors is fine and dandy, but there's a subclass of stocks called dividend stocks that aren't a sector per se, but can be an investment strategy of its own. Index funds come up a lot in this type of discussions, but REITs do not, despite being pretty decent options as well. For crypto specifically, what almost no one mentions is that bitcoin is actually one of the more conservative crypto options compared to upstart altcoins. Etc. There's a lot of reading one can do across the board.

I'm very specific that crypto is not for everyone, but neither are things like shorting stocks, even though one might be more inclined to call shorting "real investing", whatever that means.

Re: Ask HN: Should one diversify their stock portfolio

#17

Just because you come from the tech industry does not mean you know something special about the tech companies, their business prospects, financials and how attractively they are priced.

Another problem with concentrating in the industry in which one works (and even worse - the company for which one works), is that in the event of a downturn, both your job/career and your investments will be hit at the same time. Just when you need your investments the most, they will be worth less than you expected.

That is what happened with Enron. Company went under, peoples 401K were in the company stock, company matching was in the company stock. After that I noticed companies would either not let you put your donation to the 401K be in company stock, but sometimes the matching would be.

Re: Ask HN: Should one diversify their stock portfolio

#18

Buy the S&P 500 and save yourself a lot of time trying to pick industries.

Agreed, that is the simple and low stress method.

Of course a key part is, when do you think you will need the money? 10 years S&P 500, between 5 & 10 .... well its not so easy ...

Re: Ask HN: Should one diversify their stock portfolio

#20

Just because you come from the tech industry does not mean you know something special about the tech companies, their business prospects, financials and how attractively they are priced.

Although it may give you some beneficial thought processes about products and future state of the tech industry.
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