Making the tough decisions
My business partner and teammate Bridget stood behind my desk chair. “You know you have to do it, so just do it,” she directed.
My computer mouse hovered over the “execute” button on our trading system. The trade set up on the screen was for my own retirement account. A certain well-known technology company stock I had purchased years before. As the best performing stock I had ever owned, the company had outperformed the rest of my investments, and now comprised almost 40% of the account. My portfolio was way too concentrated in this one stock, driving my risk level through the roof, and I knew it, but as we were going through this exercise, the stock was up again. I loved this investment.
“I can’t do it,” I said. “It’s hitting another high, maybe I should let this play out.”
I had been advising clients on portfolio management for 30 years at that point, but now it was my turn to make hard decisions, and I was struggling to follow my own advice. The stock had made me so much money, I only had visions of more riches to come.
“I’m not placing the trade for you, but I am going to stand here until you trade it yourself. You can do this,” she said more softly. I held my breath and clicked; in an instant the position was reduced from 40% of the account to 15%.
“Thanks,” I replied. “You’re welcome,” she said as she smiled and walked out of my office. I knew I had done the right thing, even though it felt so hard in the moment.
For the past five years, the U.S. stock market has been all about the Mag-7. These seven mega-cap technology stocks, of which my stock was a leader, had come to dominate the investment landscape as the Artificial Intelligence build out drove capital spending and company earnings like few times in history.
Investment Advisors and pundits on CNBC lamented the concentration levels of the major stock market indexes, as at one point the Mag-7 stocks made up nearly 40% of the supposedly broad-based S&P 500 index (October 2025), and provided nearly 45% of the index gains in 2025, 50% of gains in 2024 and over 60% in 2023.
We portfolio manager types worried about the oversized influence these stocks were having on market indexes and individual investor psyche. We lamented the lack of diversification in indexes and excess investment returns from these companies hinted at a bubble, as across America investors were being rewarded for throwing prudence to the wind and allowing these stocks to take over portfolios. Alarm bells were ringing.
Then, recently, subtly, markets began to change. In a manner perhaps best described as “healthy,” about six weeks ago the market began a quiet rotation. The Mag-7 stocks began to weaken as volatility in these stocks set in. In past market cycles, this waning performance may have destabilized the broader stock market indexes, dragging the entire market lower.
Not this time, however. This time, as the Mag-7 began to falter, other sectors and stocks began to take up the leadership mantle, and the market seemed to broaden in a trend continuing today.
This broadening can provide a gentle, as opposed to violent, reminder of a couple investment fundamentals. First, diversification has always mattered, and still matters. Not just diversification of stocks, but also sectors, asset classes and national markets. Over time, diversification is the tool of consistency, and diversification remains the most time-tested risk management technique available to all of us, regardless of investment experience or skill. It was the right move to sell the stock I loved so dearly, as the capital was able to be reinvested elsewhere, adding further risk management to my account.
Second, selling matters. While I certainly consider myself a long-term investor, and counsel my clients this way as well, the long term is made up of a series of short terms. There are times when investments go fabulously right, but profit-taking is a critical and natural part of investing. The best time to sell, in my opinion, is at market highs, not in the throes of a market correction or bear market. No tree grows to the sky.
Finally, emotion can truly be an impediment to solid investment decision-making. I find it far more straightforward to sit in an investment committee meeting making general portfolio rebalancing and investment selection decisions for an entire practice, even when the decisions impact my own accounts, than I do making decisions in self-managed positions.
The gains in my technology stock elicited strong emotions from me; the emotions made it difficult to be prudent. Investors must find a way to manage emotions, both negative and positive, to make the hard decisions when called for. I am thankful to Bridget for standing over my shoulder, even if it hurt a bit at the time.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Stock investing includes risks, including fluctuating prices and loss of principal. No investment strategy can guarantee a profit or preserve against loss There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.
Diversification does not protect against market risk.
Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.
