Question

Suppose that someone has decided to follow a buy-and-hold strategy in technology stock purchases and buys these stocks 8 years before retirement. The stocks grow in value and this person's retirement wealth increases. Critically evaluate this investment decision. Was it smart? Could it have been improved?

Answer 1

This cannot be viewed as a smart choice because of the fact that for a normal person the risk seeking levels would be low if he's near retirement. If his portfolio just had one stock, then it means it is highly risky in nature as a result of which I'd the value of his risk goes down, then his money will be lost and he wouldn't have anything for his retirement. That's why, it is important to understand that increasing just in one stock isn't a good and inorder to offset the risk, it is better if the risk goes down by diversifying the stocks where you invest the same money in various stocks so that risk levels are lowered all in all.