Falling In and Out of Love

It is easy to fall in love with something that lifts you up and supports you throughout your life.  

It’s not so easy to let it go, especially when it continues to lift you up and support you.

The efficient-market hypothesis suggests much of the future growth (and maybe more) is already priced into the stock.  

Which brings me to my next point.

Is it time to let go of those favorite stocks in your portfolio that have served you well throughout the years?

With this year’s sell-off in the stock market, maybe it’s time to establish a plan to diversify these stocks, (and pay any capital gains), if not completely liquidate them.

Coffeehouse Investors know the chance of a favorite stock outperforming the market in the years ahead is small. According to research by Professor Hendrik Bessembinder of Arizona State University, the chances are infinitesimally small.*

In bringing this phenomenon to your attention, I am not implying that your favorite company won’t continue to be successful. In fact, it probably will. But for Coffeehouse Investors, there is never a bad time to do the right thing. Which may include diversifying your portfolio.    

If you're ready to make changes, let's discuss in a strategy session with me.

*Bessembinder, H. (2018) Do Stocks Outperform Treasury Bills? Journal of Financial Economics.