Bank of America just made history by completing one of the longest stock recoveries ever. The bank was trading near $53 at the end of 2006 before the Global Financial Crisis sent it crashing. For the next decade, the stock moved between $10-$30 and only in the last month did it finally reclaim its old high of $53.
This highlights one of the biggest risks of individual stocks. When you put all your eggs in one basket, you expose yourself to the chance of buying a stock that crashes and never recovers or in this case takes nearly 20 years to get back to even. During that time, inflation eats away at your money and you lose enormous opportunity cost compared to simply investing in a reliable, steadily growing asset like the S&P 500.
Let this real example serve as a warning. Individual stocks can be a small slice of your portfolio, but relying heavily on them can set you back decades.
Source: Google Finance
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