The Risk Nobody Talks About When a Stock Takes Off

If you spend enough time around a kitchen table at the firehouse, a family gathering, or even scrolling social media, you’ll hear it. Someone always has a story about a stock that skyrocketed. The conversation usually sounds something like:

“Man… if you would’ve bought that company five years ago, you’d be set.”

Those stories are fun. They’re exciting. And honestly, they make investing feel a little like winning the lottery.

But here’s the part that doesn’t get talked about nearly enough - real investing success rarely comes from chasing exciting stories. More often, it comes from consistency, patience, and balance.

Let’s talk about why that matters.

A Reminder from Market History

When we zoom out and look at history, the overall stock market has shown a powerful pattern. It has experienced crashes, recessions, and uncertainty - yet over extended periods of time, it has historically grown.

One way to see this is by looking at what happened to a single dollar invested in the broad U.S. stock market decades ago.

Historically, that one dollar has grown dramatically over time when dividends were reinvested. The path was never smooth. There were major downturns along the way. But over the long run, diversified investors were rewarded for staying invested.

The important lesson is not that markets never fall - because they absolutely do. The lesson is that long-term growth has historically favored disciplined investors who stay diversified.

Market Declines Are Normal… And Expected

Another historical pattern investors sometimes forget is how often market pullbacks occur.

Since the mid-1900s, markets have experienced:

• Frequent small declines

• Regular corrections around 10%

• Occasional bear markets where losses reach 20% or more

• Rare but severe downturns exceeding 30%

These declines are uncomfortable, but they are also a normal part of how markets function. In many ways, volatility is the price investors pay for long-term growth potential.

What surprises many investors is that while broad markets experience downturns periodically, individual stocks can experience severe losses much more frequently.

The Difference Between Investing and Gambling

Investing is meant to be strategic. Gambling relies on hoping for a single outcome.

That line can blur when investors place large amounts of money into one company or chase trending stocks. It begins to resemble betting on a single event instead of building a long-term strategy.

A helpful comparison I often share is this:

Buying one stock is like betting on one player to score the winning touchdown.

Diversifying across many investments is like owning the entire team roster. You may not have the lone star performer every season, but you improve your chances of long-term success.

The reason single stocks can make huge gains is the same reason they carry significant risk. The higher the potential reward, the greater the potential loss.

Even Strong Companies Experience Major Swings

Over the last few decades, we’ve seen technology companies rise quickly and transform entire industries. Some investors built incredible wealth by holding those companies early.

But history also shows that even dominant companies can experience sharp drops in value. Sometimes those declines happen because of competition, changing consumer behavior, economic conditions, or simply unrealistic expectations catching up with reality.

Concentrating heavily in one company can create life-changing gains… but it can also create devastating losses. Both sides of that coin are real.

The Leadership Cycle Always Changes

Another powerful lesson from history is that different areas of the market take turns leading performance

.

There have been long stretches when:

• Large U.S. companies dominated returns

• International companies outperformed domestic markets

• Smaller companies outpaced larger corporations

• Certain sectors surged while others struggled

No single category wins forever.

Diversification helps investors participate in whichever area performs well next - without needing to predict which one that will be.

And the truth is… no one consistently predicts those shifts correctly.

The Three Hardest Words Investors Can Say

The three most honest words in investing are:

“I don’t know.”

That statement is not weakness. It is the foundation of smart financial planning. It acknowledges that markets are unpredictable and that building a resilient portfolio matters more than correctly guessing every time.

Diversification exists because uncertainty exists.

The Trade-Off That Protects Investors

Diversification means you will never have 100% of your money in the best-performing investment every year. Something in your portfolio will always lag.

That can feel frustrating in the short term.

But diversification is designed to reduce the risk of catastrophic losses. It is meant to help portfolios survive market storms, economic cycles, and unexpected events.

In simple terms, diversification may lower your chance of hitting a financial grand slam… but it dramatically reduces your chance of striking out entirely.

Investing Should Support Your Life, Not Control It

For many firefighters, police officers, and families I work with, investing is not about chasing headlines or bragging rights. It is about building options.

It is about creating the flexibility to retire when you want, support your family, and enjoy life after decades of service.

That kind of financial confidence rarely comes from betting on one company. It comes from building a thoughtful, diversified plan and sticking with it through both good and challenging markets.

That is compounding change - steady progress that builds meaningful results over time.

Final Thoughts

There will always be exciting stock stories. There will always be companies that rise quickly and capture attention. Those stories can be inspiring, but they should also remind us how unpredictable markets can be.

Successful investing is usually less about finding the next superstar company and more about building a strategy that can adapt, grow, and withstand change over time.

If you want help building a retirement plan designed around your goals, your timeline, and your comfort with risk, let’s talk. I would love to help you create a strategy focused on building the retirement you deserve - not one dependent on guessing which stock might win next.

Planning today for the life you want tomorrow.

Until next time,

Shannon

Important Educational Disclosure

This article is intended for educational and informational purposes only and should not be considered personalized investment advice. Investing involves risk, including the potential loss of principal. Past performance does not guarantee future results. Diversification does not ensure profit or protect against loss in declining markets. Investment decisions should be made based on an individual’s financial situation, goals, and risk tolerance. Please consult with a qualified financial professional before making investment decisions.