Without a doubt, the financial scandal of the week has been the Volkwagen case. This fact has affected me directly, since I am a shareholder of the company. Therefore, I am going to dedicate this article to examining what has happened in the Volkswagen case, explaining what I am going to do as a shareholder of the company and analyzing what lessons we can learn as investors for the future.
What happened to Volkswagen?
Volkswagen is accused of installing software in its cars to mislead the US environment agency (EPA) in relation to their pollutant level. As I have read, in various media, this is a fairly common practice among all manufacturers as can be seen in this publication of "FOR 6 for the year 2015.
Finally, I have to admit that deciding to continue as a shareholder has been a difficult decision. I have reasons to sell, but also to buy more shares. Possibly the reason that made me choose not to sell was the company's speed in admitting the error and taking the first measures instead of trying to drain the bulk. However, I do not rule out changing my mind in the coming days and selling the company's shares, as new relevant news will surely come out on the subject that I must analyze and take into consideration.
Was my investment in Volkswagen an avoidable mistake?
I have always liked share and publicly analyze my investment mistakes. I am aware that, despite my years of experience, I still have a lot to learn. One of the best way to do this is by analyzing your own mistakes and taking the necessary measures so that they do not happen again.
In my opinion, the Volkswagen case has been an investment mistake almost impossible for investors to forecast. We must not forget that when we invest in the stock market we are buying part of a business. We become owners of a part of a company. That carries a number of risks, many of them very difficult or simply impossible to forecast. Uncertainty is part of any type of investment. For things like this, investing in the stock market is so profitable in the long term, because it drives away savers who are incapable of assuming some risk, which, in addition, has been and can be mitigated, as I will explain below.
What lesson can we learn from the Volkswagen case?
In this case, the main lesson we can draw is that by investing in the stock market we are exposed to risks that are very difficult to forecast in advance. Therefore, the diversification of our portfolio is essential.
My exposure to Volkswagen made up about 6% of my investment portfolio. After the falls, it represents approximately 4%. In other words, a 30% drop in one of my main positions has only meant a 2% drop in my investment portfolio. Obviously, nobody likes to suffer these drops, but diversification makes the impact of errors, both avoidable and non-avoidable, much less overall.
I have largely overlooked the topic of diversification on the blog, so I am committed to uploading an article on this critically important topic in the coming weeks.
What is your opinion?
I have just presented my reasoning on the Volkswagen case.
Now it is your turn to leave your opinions.
- Should I sell my Volkswagen shares?
- Should I buy more?
- Was it a mistake you could have avoided?
- What more lessons can we learn from the Volkswagen case?
- How much should investors diversify?
I await your comments!
Related articles on the Volkswagen case
- Volkswagen. Eleven million cheated vehicles (Gurusblog)
- The Volkswagen scandal puts the diesel industry in check (Expansion)
- This is how Volkswagen tricked cars to 'lower' emissions (Expansion)
- Dirty Volkswagen, entered Repsol (Unience)
- Which fund has been affected by the fall of Volkswagen? (Morninstar)
- Outrage among Spanish managers 'run over' by the fall of Volkswagen (The confidential)