2006-10-04 05:40:47 · 6 answers · asked by mckelly7 1 in Business & Finance ➔ Investing
There are a lot of responses indicating for you to diversify, and this is definitely sound advice, especially for a retirement account (if this were a speculative investment diversification is less important, but 25% is still too much). You do also want to avoid overdiversification, try to keep something like 4-6 investments from different sectors in your portfolio.
With regard to Costco, there are a lot of reasons to love the company. They are the leader in bulk retail goods and don't trade at too much of a premium (P/E 21.87) than some of its "competitors" (Wal-Mart at 19.28, Target at 19.78). I quote competitors because bulk retail is somewhat different than discount retail.
Additionally, in light of a decent amount of speculation of an upcoming recession (indicated by oil prices, the housing bubble, the yield curve) it's best to invest in companies that provide the necessities like Proctor and Gamble (PG) and Costco. Costco additionally so because bulk tends to be more cost-effective.
They were recently downgraded, primarily due to diminishing margins, especially on drugs, but I don't see that as overall hurting the investment (Costco has weathered the downgrade reasonably well).
I like Costco and think it's a good way to recession-proof your investment.
I have no position in Costco or any of the other stocks I've mentioned, though I like PG right now as well.
2006-10-04 07:13:41 · answer #1 · answered by ratboy_wustl 2 · 0⤊ 0⤋
From what I've heard, Costco is doing fairly well. However, if you have the option, I would try and diversify your 401(k). If Costco stock begins to fall, you might loose a lot of the value in you 401(k). Consider Fidelity or Vanguard - they usually keep costs down on 401k options.
2006-10-04 06:31:24 · answer #2 · answered by bensethadam 1 · 0⤊ 0⤋
everyone pretty much answered your question.. even though costco is a good company and is ALWAYS going to be around.. i would never put my money into just one company in my 401k (look at what happened at enron)
if your still young and your 401k has other stock options.. put 80% into small cap, large cap, or international stocks.. and 20% into bonds.. and keep it movin!
2006-10-04 08:53:06 · answer #3 · answered by do it movin' 1 · 0⤊ 0⤋
No. It doesn't matter how good it is. You should not be that heavy in one stock for your retirement savings. Does your plan have advisors? I would try to find out. Try to get real professional advice and get yourself properly diversified. Is it your company stock? Sometimes plans give you only company stock. If there are limits to moving it, move as much as you can out of there. You would not want to be laid off and lose your savings simultaneously because your company tanked.
2006-10-04 05:52:31 · answer #4 · answered by dandandan 2 · 1⤊ 0⤋
It doesn't matter whether or not it is a decent stock -- it is a stupid strategy.
There are two types of risk associated with stock -- risks that can be diversified and risks that can't be diversified. You don't get rewarded for risks that can be diversified. By putting 25% of your funds in one stock, you ar investing for you future in a portfolio whose rewards does not compensate you for the risks you are taking. You can put your money in a diversified fund and get the same expected return with much less risk -- or (if you are comfortable with that level of risk) get a portfolio with the same level of risk and a much higher expected return.
DIversify!!!!!!!!!!
2006-10-04 05:48:56 · answer #5 · answered by Ranto 7 · 1⤊ 0⤋
It is a good profitable company, but I think you need to diversify more.
2006-10-04 06:50:52 · answer #6 · answered by Anonymous · 0⤊ 0⤋