For stocks: Luxury looks like a challenged sector. Earlier this week, French fashion house LVMH reported that its sales were weaker as a result of fewer tourists travelling to Paris after the recent terrorist attacks. Other luxury companies have warned explicitly about the risk of weak Chinese sales this year. In some cases, the stock prices of these companies are already reflecting such risks. Burberry’s stock, for example, is now down almost 30% in the past year.
For you personally: Stocks are risky because unpredictable stuff can happen. Terrorist attacks and changes in Chinese policies have made the environment for luxury firms very different than it was not long ago. If you bought Burberry stock because you like their brand or read an interesting article on their business, you’ve lost 30% in the past year. It’s a very good example of how owning a single stock is risky – and why it usually makes sense to own a bunch of different stocks so that no single stock can have a huge impact on your investment portfolio.
Originally posted as part of the Finimize daily email.
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