Pensinger Financial
  • About Us
    • A Quick Look
    • Core Values
    • Background
    • What it Means to be a CFP®
    • Code of Ethics
    • Investment Philosophy
  • What We Do
    • Our Services
    • Our Pricing
    • 401(k) and 403(b) Set Up
    • 401(k) and 403(b) Rollover
    • Small Business Retirement Plans
    • HCBA Retirement Solution
  • Resources
    • Investment Returns
    • Helpful Links
    • Reading Recommendations
    • Frequently Asked Questions
  • Extras
    • Videos
    • The Right Way to Invest Blog
    • Photos
    • That Familiar Voice
    • DFA Youtube Channel
  • Contact
  • Client Access
    • Atlas Software Access
    • NetXInvestor Access
    • NetXInvestor Guides

the right way to invest blog

Are You a Coffee Drinker?

5/14/2020

0 Comments

 
What if you only drank one specific type of coffee – one specific bean from a certain corner of the world?  If suddenly that bean was no longer available, you’d be out of luck, you’d have no coffee to drink.  Before the happens, does it make sense to dry different varieties, maybe a different brand with a little cream or sugar in it, or maybe hot tea instead?  In a way, this is diversification…you are diversifying your palette by introducing different drinks to it.  In the sudden event your favorite coffee is no longer available, you know you can fall back to something else for your morning cup.
 
We preach diversification…but in retirement planning. Our portfolios hold stocks in thousands of companies across the globe (and hundreds of bonds, too). We do this for a reason. Individual stocks are too risky for retirement planning. Relying on one stock or a handful of stocks to get us to retirement is like narrowing in on only one type of bean and not accepting any replacement. When it comes to our morning cup, we need to have some flexibility, and when it comes to our one chance at retirement, we need flexibility there, too. 
 
Why the coffee analogy?
 
Luckin Coffee fired their CEO and COO, and suspended other employees amid a financial misconduct investigation. Their stock has been halted from trading for weeks and year to date it has lost about 90% of its value! How often have we heard ‘this is the next Amazon [or Apple, or Microsoft…]’, ‘this company can’t miss’, or ‘this company is too big to fail,’ until it isn’t the next Amazon, it does miss, or it does, in fact, fail. When people at the top are cooking the books, that’s something no investor can predict or plan for. Sure, those people get fired, maybe even go to jail, but unsuspecting stockholders suffer, too. 
 
What if Luckin Coffee makes up a good chunk of your retirement portfolio? Now your portfolio just took a sizeable hit, a hit that can severely derail your retirement aspirations. But if Luckin Coffee is one of several thousand companies in which you hold stock, then it’s a tiny loss from where you will easily rebound, or not even notice in the first place. No matter how great the outlook for a company, bad things or bad people can happen. We can’t let bad things or bad people decimate our retirement portfolio. We prepare by properly positioning and insulating our portfolio with exposure to thousands of companies across the globe. It’s having our favorite cup of coffee, but knowing our spouse’s brand will make do in a pinch.
0 Comments

    connect


    author

    Picture
    Michael Pensinger, CFP® is Owner and President of Pensinger Financial, Inc.

    He grew up in Park Forest, Illinois and now resides in Lemont, Illinois with his wife, two children, and two dogs. Michael is actively involved in his community; coaching kids' sports, having served as Treasurer for the Lemont Area Chamber of Commerce Board of Directors, sitting on the Board of Directors for Hope & Friendship Foundation, and volunteering for the Lemont Heritage Woodland Sanctuary Open Space Committee. Read More

    Archives

    April 2021
    January 2021
    October 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    January 2020
    November 2019
    July 2019
    April 2019
    February 2019
    January 2019
    December 2018
    October 2018
    September 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    August 2015
    June 2015
    April 2015
    February 2015
    January 2015
    December 2014


    Categories

    All
    401k
    Bonds
    College
    Education
    Investing
    Mutual Calculator
    Mutual Fund
    Podcasts
    Price Movement
    Retirement Plans
    Savings Plan
    Small Business
    Stock Market
    Stocks
    Tax-Free

ABOUT US
A Quick Look
Core Values
Background
What it Means to be a CFP
Code of Ethics
Investment Philosophy
WHAT WE DO
Our Services 
Our Pricing 
401(k) / 403(b) Rollover
Small Business Retirement Plans
​HCBA Retirement Solution
RESOURCES
Client Access
Investment Returns
Helpful Links
Reading Recommendations
Frequently Asked Questions
EXTRAS
Videos
​The Right Way To Invest Blog

Photos
​​That Familiar Voice
DFA Youtube Channel
CONTACT
Lemont, Illinois 60439
630-754-7580 Phone
630-590-9392 Fax

© 2015 Pensinger Financial, Inc