Hey Reader

When I first started investing, I went wide instead of going deep.

I owned a lot of stocks. Too many. And I think two things drove that. First, everyone tells you to diversify but nobody explains what smart diversification actually means. Second, you see companies doing well, FOMO kicks in, and you feel like you need to own everything.

What actually happened is instead of doubling and tripling down on a few good companies that could have made me serious money, I spread myself thin. I mitigated some risk, sure, but I also missed out on massive returns when things hit.

But missing returns wasn’t even the biggest problem.

The management problem was the biggest issue nobody warned me about. When you own 15 or 20 stocks, especially as a newer investor, it becomes very hard to keep up with all of them. There were stocks I should have sold earlier but I wasn’t paying close enough attention. I held too long and either lost money or left returns on the table. There were other stocks I should have bought more of but didn’t because I already felt overextended. I missed opportunities in both directions. And who are we kidding, I certainly did not read 20 financial reports.

The point is, you can’t give every position the attention it deserves when you’re stretched across too many.

Here’s the other thing that took me a while to understand. Owning a lot of stocks doesn’t mean you’re diversified. It just means you own a lot of stocks.

If you own 15 stocks and 10 of them are technology that’s not diversification. Real diversification means owning good companies across different sectors. Having a few technology names is fine. Having 10 of them concentrated in one corner of your portfolio means you’re not protected the way you think you are.

And if you want exposure to one sector without the management headache, that’s where an ETF comes in. An ETF covering the S&P 500 or a specific industry gives you the broad coverage without forcing you to track a dozen individual companies.

If I could go back and do it differently here’s what I’d change: own fewer companies, know them inside & out, & make sure they aren’t all playing in the same space. Now it’s not just a collection of stocks, it’s diversification.

— Stock Savvy Dad
​Invest smarter, build wealth, be a savvy dad.