How much should I invest in shares of one company?

16 July 2019

Question by Adam

I’m thinking about investing £1000 in Sirius Minerals. I would like some advice on whether this is too small an amount to get any gains from. At the moment I would be leaving it in for the long term of 5-10 years. I do realise that no dividend is being paid.

Answered by Holly Mackay

All your eggs in one basket

I suspect my answer might be an incredibly boring one, but I'm always very hesitant when I hear people talking about buying just one share.

It's because all your eggs are quite literally in one basket, and this is a very speculative play.

Yes, you might do well and make very good returns, but equally you might lose it all.

For those sums of money and the risk you are taking, my gut feel is that it's just simply not worth it.

Spread the risk around

My preference would be to choose a multi asset fund, or something which really spreads your risk around different countries, different sectors, and different companies.

If you're talking about 5 - 10 years of being invested, you can look at having this all in shares and not in bonds, which pushes your investment up the risk spectrum.

Remember though that this amount of risk is certainly nothing compared to just investing it in one company, such as Sirius Minerals. I don't know Sirius Minerals, and you may turn round in 5 years time, having watched this go through the roof and then tell me that I'm an idiot. But you may also turn around to me in 5 years time if the company has gone under, and thank me.

The thing is that it's an extremely risky option. It's never one that I would recommend anyone to do.

Multi asset funds

The much more boring option would be to find a multi asset fund. Groups such as Vanguard, BlackRock, or Legal and General Investment Management have some options worth looking at. It won't be such a roller coaster ride, and it probably won't be so much fun, but I'm more certain that you'll have some money left in 10 years time.

Hope this helps.

Answered by

Holly Mackay

Founder and CEO of Boring Money

I’ve worked in investment markets for over 20 years. I started out at Merrill Lynch Investment Management and worked at a few big names before setting up my first business in 2008.