Good morning readers, it is 8:40 AM on a Monday morning, and it feels nice to be up this early as it has taken me a while to get back to a decent sleep schedule. I woke up early, ready to buy more shares of a certain company for the investment fund, and added a new position that neither of our household accounts have.
After looking at the weightings of the investment fund sheet, I wanted to make sure that I lowered the percentage of some of the holdings, even though right now I am still full speed ahead on acquiring a certain number of shares of the company that has been my main focus, so the weighting will be out of sorts for a while. Still, this new position I plan on adding a couple more shares before the end of this month.
My thinking right now is that even if the market were to downturn and the investment fund took a hit on its highest weighted position, it wouldn’t affect things in the long run because I invest on fundamentals, not Mr. Market.
Meaning no matter what happens to the share price on the surface, as long as the fundamentals of the companies do not change, I am not worried or racing to push a button to sell out of positions. In fact, I have only ever sold out of positions less than a handful of times because I tend to invest in businesses that I understand and am comfortable to ride with through the good and bad.
This is also why I tend to use Coca-Cola as a main example on this site, because it is such an easy business to understand at a fundamental perspective. This has made me wonder if I should start a blog called The Coca-Cola Investor, however, I prefer no legal troubles, and I would fall in love with the name too much only for them to send a letter to change it. I’d rather avoid that heartbreak.
Back to the point, when it comes to understanding certain holdings or acquiring certain businesses at the start, I am not particularly concerned about overall weighting. As this will even out as I find other investable opportunities.
Still, to be aware of such things is important for any investor who is concerned about their portfolio hemorrhaging during a downturn. Understand your own risk tolerance and personal objectives. Meaning, what is the purpose of your own investments?
To further break it down, there are some investors who have never bought any other stock in a company besides Coca-Cola since the ’90s, and then there are investors who have only ever held onto five positions. Could you sleep at night knowing all that you hold is in Coca-Cola?
Could you sleep at night knowing that a turn of events like a lawsuit or public perception has shattered the stock to year lows? If so, then good for you. If not, this is where it matters to be diverse in what you hold.
It’s not the only factor to consider, but it is one of them. Are you okay with one position out of five holdings dragging down half of your portfolio, especially if that position is overweighted?
For example, the company I am acquiring shares of is 40% of the investment fund right now, which means if the market turned tomorrow, it would drag down the rest of the portfolio no matter how good the other holdings are.
These are the questions to consider for yourself when you are learning how to become a better investor rather than a gambler of the stock market.
The Broke College Student 
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