On the flip side, say you’ve invested $1,000 in each of those 20 stocks, and 19 of them go nowhere, while one of them turns out to be a 10-bagger investment. In that case, your initial $20,000 overall would have grown to a substantial $29,000 ($1,000 each in 19 stocks, and $10,000 in one of them). Even with your money spread out over 20 stocks, the outperformance from one massive winner can potentially outshine the pain from an otherwise mediocre portfolio.
In addition, since not every stock is going to outperform, having your money invested across multiple companies that could outperform increases your chances that at least one of them will do so. Is it a guarantee? No — but investing with an eye toward diversification in your portfolio can set you up to have a better chance for at least some luck to be on your side.
3. Recognize that patience is your best advantage over Wall Street
Wall Street hires an army of very sharp stock analysts, runs a bevy of artificial intelligence programs, and has ultra-fast connections to news and markets. When it comes to speed and information, Wall Street will beat us mere mortals every time. Wall Street has one major disadvantage over ordinary investors, however. That disadvantage is that Wall Street investment firms tend to manage a lot of other people’s money.
