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Which investor is making a common error?
an employee of a popular hardware store who invests only in that company’s stock
an employee of a popular software company who invests in many similar companies
someone who sells the slumping stock while they are still able to make a profit based on what they paid
someone who buys stock in both domestic and more risky international companies
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The employee of the hardware store who invests only in that company’s stock.
Reason: putting all your money into one company (especially your employer) creates severe concentration risk — your income and investments both depend on the same firm. That’s a classic investing mistake. (By contrast, buying both domestic and international stocks is sensible diversification; the others can also be mistakes — e.g., buying many similar firms isn’t true diversification, and selling winners too early is a common behavioral bias — but the first is the clearest error.)
Reason: putting all your money into one company (especially your employer) creates severe concentration risk — your income and investments both depend on the same firm. That’s a classic investing mistake. (By contrast, buying both domestic and international stocks is sensible diversification; the others can also be mistakes — e.g., buying many similar firms isn’t true diversification, and selling winners too early is a common behavioral bias — but the first is the clearest error.)
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