Financial disasters happen all the time -- occasionally to
you! That's why you need to be prepared. You may be carrying
enough insurance to offset the costs of any sudden natural
disaster, and investing in a diversified portfolio has
protected you at least in some part from losses and
underperformance.
But there's probably one financial disaster you haven't
anticipated: What if your stock holdings go through the
roof?
The perils of portfolio pops
Imagine that you buy shares of Scruffy's
Chicken Shack (Ticker: BGAWK) for $20 apiece. Within a year,
thanks to some super earnings reports and bullish commentary
from management and analysts, the stock tops $50. You've made
more than 150% on the stock, which is good news. But here's
the disaster:
For someone who's made $15,000 on one stock in a year,
you're in quite a pickle, no?
This isn't such an extreme situation, either. Even in this
tough market, getting in at the right time could have
produced some big gains. Take a look at some of the following
recent year-to-date returns:
Stock
YTD Return
Ford Motor (NYSE: F)
211%
Freeport McMoRan Copper &
Gold (NYSE: FCX)
204%
AMD (NYSE: AMD)
172%
Goldman Sachs (NYSE: GS)
127%
Apple (Nasdaq: AAPL)
123% Continued... |