How Many Stocks Should You Own?
Kiplinger's Personal Finance|July 2022
With this year's rough ride, you don't need reminding that stocks are volatile.
How Many Stocks Should You Own?

Their prices bounce up and down, sometimes in extreme ways. The U.S. market as a whole has produced average annual returns of about 10% over the past century, but it doesn't go up 10% every year. In roughly one out of four years, it declines-sometimes a lot.

If stocks returned the same amount every year, then, like bonds, they would yield gains of only a few percentage points. High returns are the reward you get for enduring the fear (often the sheer terror) of watching pieces of your nest egg disappear into thin air. People like me tell you to hold on. History shows that markets bounce back. But enduring sickening declines isn't easy.

The best way to smooth the ride is through diversification. I'm not talking here about portfolio diversification-the allocation of your assets to stocks, bonds, cash and maybe more. Portfolio diversification is a necessity but a subject for another day. The topic today is diversification in the part of your portfolio that consists of stocks and stock funds.

The value of diversification seems awfully obvious. Morningstar data in June 2021 showed that about 39% of all U.S. stocks had ever suffered three-month losses of 50% or more, but fewer than 1% of diversified stock funds had incurred losses that severe.

Consider the sad tale of Enron, once a high-flying Houston energy company. When it collapsed in 2001, thousands of investors, including Enron employees whose retirement plans were heavily invested in the stock, suffered huge losses. Enron was the seventh-largest company in the Fortune 500, but in 2000 its market capitalization (price times shares outstanding) represented less than 1% of the value of the S&P 500 index. If you had put $10,000 in an S&P 500 index fund and all the other stocks maintained their prices, then Enron's trip to zero would have cost you just $100.

Bu hikaye Kiplinger's Personal Finance dergisinin July 2022 sayısından alınmıştır.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

Bu hikaye Kiplinger's Personal Finance dergisinin July 2022 sayısından alınmıştır.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

KIPLINGER'S PERSONAL FINANCE DERGISINDEN DAHA FAZLA HIKAYETümünü görüntüle
MAKING A DIFFERENCE IN THE LIVES OF DISABLED VETERANS
Kiplinger's Personal Finance

MAKING A DIFFERENCE IN THE LIVES OF DISABLED VETERANS

He suffered grave injuries in the line of duty. Now he helps other veterans who have disabilities.

time-read
2 dak  |
November 2024
DO YOU NEED UMBRELLA INSURANCE?
Kiplinger's Personal Finance

DO YOU NEED UMBRELLA INSURANCE?

A policy can protect you from financially devastating events.

time-read
2 dak  |
November 2024
Navigating Finances as a Blended Family
Kiplinger's Personal Finance

Navigating Finances as a Blended Family

Money matters can get complicated when two families unite. Planning is key.

time-read
4 dak  |
November 2024
BREAKING UP WITH YOUR BROKER
Kiplinger's Personal Finance

BREAKING UP WITH YOUR BROKER

Be aware of these challenges when you move your money to a new home.

time-read
5 dak  |
November 2024
CHOOSE A MEDICARE PLAN THAT'S RIGHT FOR YOU
Kiplinger's Personal Finance

CHOOSE A MEDICARE PLAN THAT'S RIGHT FOR YOU

Consider your health care needs over the long term as you weigh costs and coverage.

time-read
9 dak  |
November 2024
Keep Faith in These Stocks
Kiplinger's Personal Finance

Keep Faith in These Stocks

IN 1997, I coined the phrase “faith-based investing.” It has nothing to do with religion or with picking stocks at random.

time-read
5 dak  |
November 2024
OUR ESG PICKS ARE THRIVING
Kiplinger's Personal Finance

OUR ESG PICKS ARE THRIVING

Despite an ongoing backlash, our favorite stocks and funds focused on environmental, social and corporate governance issues had a good year overall.

time-read
9 dak  |
November 2024
MONEY MANNERS FOR THE MODERN AGE
Kiplinger's Personal Finance

MONEY MANNERS FOR THE MODERN AGE

The customs for splitting a restaurant check, purchasing a wedding gift, tipping and more have evolved. These guidelines can help.

time-read
8 dak  |
November 2024
ELECTION 2024: POLITICS AND YOUR PORTFOLIO
Kiplinger's Personal Finance

ELECTION 2024: POLITICS AND YOUR PORTFOLIO

Who wins the White House matters—but only at the margins when it comes to your investments.

time-read
2 dak  |
November 2024
YOUR GUIDE TO OPEN ENROLLMENT
Kiplinger's Personal Finance

YOUR GUIDE TO OPEN ENROLLMENT

With health care costs on the rise, it’s critical to select a plan that fits your needs at the right price.

time-read
7 dak  |
November 2024