At twelve years old, I had one mission: get a girlfriend. And I was convinced the key to making that happen was owning a really nice stereo.
Several girls at my church loved music, and I decided the perfect move was to make a custom mixtape — the kind recorded song by song from 45 rpm records onto cassette. Long before Spotify playlists, a mixtape was how a lot of us expressed our feelings. There was just one problem: my stereo wasn’t good enough to make one.
So, I did what my parents had taught me to do. I went to work.
Saving for a Stereo, and Finding Something Bigger
In our family, we didn’t finance the things we wanted. We saved for them. After months of cutting grass, cleaning offices, and taking on odd jobs, I finally had enough to buy my dream stereo — a Panasonic system from Service Merchandise. I’d studied every catalog that came through our house, narrowed it down, and even taped the picture to my dresser mirror as motivation.
Service Merchandise was across town, so I had to wait for a ride. Patience was never my strength. While I waited, I rode my bike to a nearby store just to look around — and found an almost identical Panasonic stereo for considerably less money. It lacked the fancy digital display and had slightly less power, but by the time I got home, I’d made up my mind.
The name of that store was Walmart.
The Conversation That Changed Everything
That weekend, my parents drove me to Walmart in our station wagon to bring the stereo home. I couldn’t wait to start making mixtapes — but my father had other plans. He struck up a conversation with the cashier, who had transferred from Arkansas and spoke about Walmart’s founder, Sam Walton, with real admiration.
“Several people who work here have become millionaires because of the stock,” she said.
Millionaires. Working at Walmart. Suddenly I wasn’t thinking about stereos anymore.
She explained how employees built ownership through the company’s profit-sharing plan and payroll stock purchases. My father was intrigued. So was I. The following week, I rode my bike to the public library and pulled up old newspaper and magazine articles on microfiche.
The more I read about Sam Walton, the more I understood why the company worked: everyday low prices meant customers never had to wait for a sale — and Walmart had been public for only about twelve years and already operated roughly five hundred stores, with new locations opening constantly.
Becoming an Owner at Twelve
After several family conversations, I decided to buy Walmart stock. Brokerage commissions were expensive back then, so my father bought one hundred shares, and I gave him $200 which bought me ten shares. He didn’t take any of the commissions out of my ten shares so all of my money went to work!
I was twelve years old, and I was a stockholder! I had no real grasp of what that meant.
What I did understand, even then, was that I couldn’t wait to walk into that store each week — because now I was an owner. I noticed the employees genuinely cared. They smiled. They talked about “Mr. Sam” with pride. Many owned stock themselves, and it showed.
I kept reading library books on investing, and somewhere between studying companies and making mixtapes for a girl, I fell in love with investing.
By sixteen, I’d left my job at Kroger to chase a job at Walmart. I didn’t get hired at the store in my neighborhood, so I took a job at Burger King instead — where a coworker connected me to a bigger Walmart location that badly needed help. I became a “buggy boy,” gathering shopping carts in the parking lot, told I’d likely be let go once new carts arrived that fall.
I didn’t care. I just needed my foot in the door. By fall, I was offered a position inside — and signed up to have $25 from every paycheck automatically invested in Walmart stock through the employee purchase plan.
By the time I graduated high school, Walmart had grown to more than a thousand stores. I was so busy calculating how long it would take me to become a millionaire that I nearly failed algebra! My math teacher, fortunately, was more patient than my parents.
The Broker Who Told Me to Diversify
Investing in Walmart taught me to stop asking “What toys can I afford to buy?” and start asking “What businesses do I want to own?” That shift became the foundation of everything I’d later teach clients.
When I left for college and changed my address, my stock account moved to a brokerage firm closer to campus. My new broker called, made small talk, then got to the point: “I think you should diversify.”
He recommended selling part of my Walmart position and moving the proceeds into a diversified mutual fund. When the fund information arrived, one detail jumped out immediately — the fund owned Sears, Kmart, and other retailers that Sam Walton was working tirelessly to beat every single day.
That made no sense to me. If I believed Walmart was the best retailer in America, why would I dilute my investment by also owning the companies it was taking customers from?
I kept my shares.
My father kept buying too. Year after year, Walmart opened new stores, sales and profits grew, and the stock split again and again. By the time we sold nearly a decade later, our investment had appreciated by more than 2,000%. Over that same period, one of the best-performing diversified mutual funds had only gained roughly 200%.
Both investments made money. One made far more — and it permanently shaped how I think about stock selection.
Diversification Is Important. So Is Conviction.
Let me be clear: I am not suggesting investors put all of their retirement savings into a single stock. Concentration creates wealth. Diversification helps preserve it. Those are two different objectives, and confusing them is a common mistake.
At twelve, I had decades until retirement, no income needs, and no sequence-of-returns risk to worry about. I simply owned a wonderful business that kept getting better. After more than three decades managing portfolios through bull markets, bear markets, crashes, and recoveries, I appreciate diversification far more than I did back then — but I also believe investors can make the opposite mistake and become overdiversified.
Picture walking into a casino and placing a chip on every number on the roulette wheel. You’d feel safe. But once the wheel stops, your winning bets are almost completely offset by your losing ones. Owning dozens — or hundreds — of average companies may reduce company-specific risk, but it can just as easily dilute your best ideas.
The real goal is to own enough exceptional businesses that one mistake doesn’t derail your future, without owning so many that your best ideas stop mattering. Finding that balance is one of the hardest parts of portfolio management.
What I Teach the Next Generation – Stuff Your Kids’ Stockings with Stocks
Years ago, a client asked me what to get her grandchildren for Christmas. I suggested that she give each of her three grandchildren $1,000 in a brokerage account and I would meet with them individually to help them decide how to invest. She sweetened the deal: whichever grandchild’s portfolio performed best would get a bigger gift the following Christmas.
I didn’t start those meetings by talking about P/E ratios or balance sheets. I asked each of them what companies they used every day — and which one they genuinely loved. I wanted them to see the market the way I first saw it, standing in a Walmart checkout line: a marketplace of real businesses that create products, solve problems, hire people, and compete for customers every day.
When you own part of a company you understand and believe in, investing stops being about watching numbers move — and you stop thinking like a customer and start thinking like an owner.
That doesn’t mean putting all your money into your favorite company either. That would just trade one mistake for another. Diversification still matters, especially as you approach or enter retirement.
I was fortunate. Walmart was an exceptional business with decades of growth still ahead of it, and I was a young investor with time on my side. I didn’t have thirty years of market experience yet — I had the benefit of not needing that money for a very long time.
The Bottom Line
My first investment worked because I accidentally stumbled onto one of the most important principles in investing: great businesses create great wealth.
Walmart was expanding into new markets, growing earnings, rewarding shareholders, and changing how America shopped. That’s the type of company I’ve spent my career looking for. Does that mean every great company deserves a large position? No. Risk management and diversification still matter. But there’s a real difference between diversification and overdiversification — one protects your wealth, and the other can dilute your best ideas.
Straight Talk: Wall Street often pushes investors toward passive index funds that own everything in the index — and for some people, that’s the right call. But I’ve found that many clients sleep better owning individual stocks they know, understand, and believe in on a buy-and-hold basis, while I actively manage and hedge the rest through market corrections using fundamental and technical analysis.
Owning businesses you understand — paired with real discipline around risk — is what makes you a better investor.
Byron’s Rule For Recreating Your Paycheck: Own enough exceptional businesses to protect yourself from being wrong, but never so many that you can’t recognize when you’re right.
Frequently Asked Questions
Should I diversify my portfolio or concentrate on a few stocks I believe in? Both have a role, but they serve different goals. Diversification is a risk-management tool — it protects wealth you’ve already built, which matters most as you near or enter retirement. Concentration in a small number of exceptional, well-understood businesses is how significant wealth tends to get created in the first place. The mistake isn’t choosing one over the other; it’s confusing which goal you’re actually solving for at a given stage of life.
What is “overdiversification” and why is it a problem? Overdiversification happens when a portfolio holds so many stocks — often including mediocre or competing companies — that strong performers get diluted by weak ones, similar to betting on every number on a roulette wheel. It can lower company-specific risk, but it also waters down the impact of your best investment ideas.
Is it smart to invest in companies I personally use and understand? Yes, with a caveat. Understanding a business — how it makes money, why customers choose it, how it’s growing — helps you hold on through volatility instead of panic-selling, and helps you evaluate it more like an owner than a customer. That said, personal fondness for a brand shouldn’t replace real due diligence, and no single favorite company should make up your entire portfolio.
How much of my portfolio should go into individual stocks versus index funds or mutual funds? There’s no universal number — it depends on your time horizon, income needs, and risk tolerance. Investors with decades until retirement and no near-term need for the money can typically afford more concentration in individual businesses they understand well. Investors closer to or in retirement generally benefit from broader diversification to protect against sequence-of-returns risk. A fee-only fiduciary financial advisor can help calibrate this to your specific situation.
About Byron L. Studdard, CFP®
Byron L. Studdard is a CERTIFIED FINANCIAL PLANNER® professional and the founder of Studdard Financial – a fee-only fiduciary registered investment adviser serving clients from coast to coast from offices in Sarasota, FL and Memphis, TN. For more than thirty years, he has provided personalized investment advice, retirement planning guidance, social security maximization strategies, and intergenerational wealth-transfer support to clients seeking disciplined, trustworthy financial oversight. His writing has been featured on the websites of ABC News, Good Morning America, and Yahoo. He can be reached at Byron@StuddardFinancial.com.
Important Disclosures:
All information provided is for educational purposes only and does not constitute investment, legal or tax advice; an offer to buy or sell any security or insurance product; or an endorsement of any third party or such third party’s views. The information contained herein has been obtained from sources we believe to be reliable but is not guaranteed to be accurate or complete. Studdard Financial, LLC does not offer tax or legal advice, but might refer clients to independent accounting, tax, or legal professionals.
Whenever there are referrals to other professional advisors, or references or hyperlinks to third-party content (including but not limited to tax and legal), this is intended to provide additional perspective and should not be construed as an endorsement of any services, products, guidance, individuals, or points of view. All examples are hypothetical and for illustrative purposes only. Please contact us for more complete information based on your personal circumstances and to obtain personal individual investment advice.
Carefully consider your investment objectives, risk factors, and charges and expenses before investing. Investing involves risk, including possible loss of principal. Consult your own advisor about the implications of investing. Diversification and asset allocation may not protect against market risk. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations.
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