Problems with Concentrated Stock Risk
Broken Pie Chart · Broken Pie Chart
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Show Notes
How risky is just holding a single stock in a portfolio? Often either through company stock grants or holding company shares for very long periods where it has appreciated investors may wind up holding either a single stock or just a few. This creates single stock risk and has both systematic stock risk and idiosyncratic stock risk. Derek Moore reviews how the volatility via the standard deviation may increase as well as some interesting historical data on Apple stock regarding its annual drawdowns and volatility.
What is concentrated stock risk?
What is systematic stock market risk?
What is idiosyncratic stock risk?
Comparing volatility of single stocks to a market portfolio
How many stocks does it take to achieve diversification?
How does correlation indicate whether diversification will work?
Why diversification fails when markets sell off badly
Apple's annual compounded growth rate performance 1981 through 2008
Apple annual significant drawdowns
Apple stock standard deviation from 1981 through 2018
Mentioned in this Episode:
Book: Broken Pie Chart https://amzn.to/31oy1hE
Razor Wealth Management www.razorwealth.com
Study showing single stock volatility compared to market portfolio http://ppca-inc.com/Articles/DiversByNumbers.pdf