Too much money in one place
One of the biggest problems that seems to come up repeatedly over the years is that too often people with legacy positions that have grown are reluctant to sell or trim a stock position. It is not uncommon for a position that has been inherited or held for many years to
grow into a large portion of their portfolio and wealth. Too often people are reluctant to sell even some of these holdings, whether due to sentimental attachment or a reluctance to entertain capital
Rule No. 1 that most investors learn is to diversify, and yet, they do not recognize the risks that this can create to the wealth they have accumulated. A related mistake is by those who gravitate
toward a single sector – whether by virtue of company stock they’d picked up as an employee, familiarity with a single industry, or simply because a telephone company split into many companies, but has left the investor with an abundance of a single sector. It’s not a problem to overweight certain industries or even companies, but too often investors to do not recognize the risks they have taken by letting these weightings grow too be too much of a commitment to one
company or industry.
--J. Christopher Boyd, Asset Management Resources, LLC, Hyannis, Mass., 02601, 508-771-8900