The theme this week on the Retirement Quick Tips Podcast is: Why Your Stock Portfolio Is More Risky Than You Think.

Yesterday, I talked about how to determine how concentrated your portfolio is, if you have any red flags with too much invested in any one stock or any one industry. 

Today, I’m talking about how you can use that information to determine if any changes to your portfolio need to be made to reduce your risk. 

How much is too much in any one stock or industry? It’s an important question and one that I learned to implement when I was still cutting my teeth as a baby advisor. 

When you think about diversification, it means having the right amount of stocks, bonds, and cash, but within the stock allocation, diversification goes much deeper. You’ll want to have a good mix of large and small stocks, have international diversification, as well as diversification across different industries. 

So if you have too much invested in any one stock or industry, it introduces an added layer of risk, but it also prevents you from investing in other areas that are important for maintaining proper diversification. 

Back to the question of how much is too much in one stock or industry? There isn’t a one-size-fits all answer here, but generally, no more than 10% of your portfolio should be invested in any one stock and no more than 20% should be invested in any one industry. 

If your concentrations are higher than that, you’ll want to make a plan for reducing your stock and industry allocations so you can better diversify your portfolio and reduce your risk. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance