Sometimes I scratch my head when there are stories about the ups and downs of stocks that are trading north of $500 per share. My curiosity stems from a question about buying and selling. Specifically, who is buying this stock? Is it just banks, investment firms and really rich people? Are there average consumers that are plunking down some serious cash to acquire these types of stocks? Not me. I cannot afford this kind of investing. The price is simply too high.
Eggs in one basket
Let us assume that I wanted to invest in one of the "hot" stocks that are currently dominating the market. I could certainly get my hands on some shares, but doing so would violate some of the investing principles that I was taught. For example, diversity is theoretically the name of the game when it comes to creating a portfolio. In addition, I would need to buy a large enough lot of shares to make it worth the potential investment. If a stock costs $500, 100 shares would obviously cost me $50,000. I do okay in life, but I do not have that kind of cash just lying around for general play in the stock market.
More than just the stock
Granted, I do understand that there are more than just the top-tier stocks when it comes to market impact. Those companies have an impact on the industry in general, which is why investors start buying or selling a whole range of companies when they get a particular feeling about the future of the sector. In addition, there are plenty of companies that provide support to larger firms and benefit from long-term growth. Still, the focal point can often be on these large companies, and there seems to be a general theme that I should think about their buy, hold or sell ratings. At least, that is what the news suggests to me.
When it comes to the heavy hitters in the marketplace today, I think about the history of certain companies. Without naming any names, I am old enough to remember when certain firms were the focal point of the stock market in terms of making an impact on the future of society. Some of those companies are still around, but they are no longer the darlings of Wall Street. The world has changed, and it will continue to shift. Buying stock is about taking risks, but I am not willing to spend that kind of money without a bit more diversity.
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