New to Investing? Why Putting All $1,000 Into 1 Stock Is a Risky First Move

New investors are smart to diversify their investment strategy. Here’s why you shouldn’t spend all your cash on one stock.

Robin Brown

Author Bio

Robin Brown has been a regular contributor to The Motley Fool Canada since January 2020. He began investing in 2009, during the depths of the global financial crisis, and has continued to refine his approach over the years. His investment philosophy emphasizes patience, quality, and identifying businesses with the potential to create lasting value. Robin currently lives in St. Albert, Alberta, where he manages a portfolio of Western Canadian industrial properties and private investments. Having lived in Canada, Norway, and Australia, he brings a broad perspective to his work and investing. Outside of work, Robin enjoys traveling, hiking, hunting, fishing, biking, and cooking for his wife, two daughters, and son.

Education

Bachelor's degree in Theology
Advanced Diploma in Business Management

Areas of Expertise

Dividend investing, value investing, quality stocks, small-cap stocks, long-term investing, business fundamentals, balance sheet analysis, capital allocation, industrial real estate, and private investments.

Social Media Profiles

Favorite Investment Quote

"Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down." — Warren Buffett

Published October 29, 10:30 am EDT

When you are new to investing, it is smart to diversify your stock holdings. When you start out, you don’t exactly know your investing style or strategy. You don’t yet know what kind of stocks or investments resonate with your personality or lifestyle.

Sliced pumpkin pie — Source: Getty Images

Diversify until you find your style

It is important to experiment with a mix of strategies. That might mean buying a mix of indexes, exchange traded funds (ETFs), and stocks.

You might own a mix of dividend, growth, and value stocks in an array of different industries, sectors, and geographies. Over time, you will find a strategy that works for you.

However, if you put all your cash into one stock or investment, you are effectively putting all your chips on one opportunity. If you are right about the investment, the payoff can be good. Yet, what if you are wrong? It can be disastrous.

Hedge your bets across a few investments

You don’t want your hard-earned savings to go down the drain on one bet that didn’t work. That is why it is smart to spread your bets out at first. If you are starting with $1,000, split it into three to four different investments that give you exposure to different areas.

If I was starting out, three stocks I would split among $1,000 are AltaGas (TSX: ALA), Descartes Systems (TSX: DSG), and MDA Space (TSX: MDA).

AltaGas: A top dividend growth stock

AltaGas gives an investor exposure to a mix of regulated and contracted income. Half its business is from a steady U.S. natural gas utility that also happens to be growing in the high single-digit range. The other half of its business is a liquefied petroleum gas (LPG) midstream and export business.

With energy disruptions in the Middle East, Asian demand for LPG is soaring. As Canada’s largest exporter, AltaGas should enjoy an uptick in pricing and volumes in the years ahead.

AltaGas is a great long-term bet on energy demand. This stock yields 2.4%, and has an attractive mid-single digit dividend growth trajectory.

Descartes Systems: A top Canadian tech stock

Descartes provides specialized network and software solutions to the logistics industry. There is a lot to like about this business. It is unlocking vast swaths of data into AI solutions that specifically cater to customer needs. The company is aiming to grow by 12% to 15% annually.

This company earns very high margins and generates tonnes of cash. Even after making more than $200 million in acquisitions in 2026, it is still sitting with a substantial cash balance. Descartes’ valuation still looks attractive after it pulled back earlier this year.

MDA Space: Canada’s best space play

If you want exposure to more of an exciting theme, MDA Space is an interesting stock. It is the largest space-related company in Canada. It is focused on providing satellites, space robotics, and earth observation services.

MDA has established expertise and a geographic footprint across Canada, the U.S., and Europe. It is set to win from an increase in defence and private communications spending.

It has a large backlog and huge opportunity pipeline. MDA stock is down 8% in the past month. The stock valuation looks interesting and is worth considering adding to a portfolio today.