[Cup of Joe] June 2025 Market Updates

Single-Stock Risk

All your eggs in one basket

1. A business/stock can go bankrupt or shut down; a diversified collection of many stocks can’t.
2. The opportunity cost of owning just one thing may be greater than the return you get.

Company stock – a common reason many people have a concentration of wealth

1. Familiarity bias can have you falsely believing the stock is less risky than it is
2. Have a strategy to manage exposure.
3. This risk can compound if the same factors causing stock volatility also affect your employment.

Timing Risk

1. You want to avoid withdrawals when and asset is in decline.  
2. The timing and length of a drawdown by one stock can differ significantly than that of a diversified mix.
3. Taking withdrawals when values are at a low-point inhibits your accounts value to recover in real dollar terms.

Volatility plays mind games

1. Periods of substantial drawdown can heighten emotional stress, which can lead to irrational decision-making, compromising your investment plan. 
2. No stock is immune from spike in volatility.  The Magnificent 7 stocks have each experienced periods of -33% to -76% performance in the last 5 years. 
3.  

The Magic of diversifying is that it creates less volatility.