What Young Stock Investors Should Know

Hi, I’m Susan Dziubinski, co-host of The Morning Filter podcast. On a recent episode, Morningstar Chief US Market Strategist Dave Sekera and I answered questions from our audience mailbag. Here’s an excerpt. Our conversation took place in November 2025.

Susan Dziubinski: Dave, Nick is 25 years old with a 30-year investing horizon. Wouldn’t you like to be Nick? I’d like to be Nick. Now, Nick has two questions for you. So first, he wonders if putting most of your money in the current Mag Seven stocks for the next 25 years could be a good set-it-and-forget-it type of investment strategy.

Dave Sekera: All right. Well, first of all, before I even address that specifically, when I think about what Morningstar’s view is for being a successful long-term investor, it’s really all about trying to build a diversified portfolio of assets geared toward your own specific situation and risk tolerance, whether you’re 25 or on the older side like I am.

But either way, once you have that good diversified portfolio, I think that you can enhance that portfolio by trying to overweight those areas that are either undervalued or at least fairly valued, and then underweight those areas that are overvalued. So again, you can overweight the things that are undervalued and hopefully have more upside appreciation potential, or at least move into those areas that are fairly valued and steer clear of the ones that are overvalued. So, for example, as we’ve talked a couple of times this year, like in the credit markets, I much prefer just investing in Treasury bonds in a fixed-income portfolio because I don’t think you’re getting paid enough for the risk in the corporate bond market.

But investing, of course, is a very reiterative process. You always have to be consistently evaluating your own portfolio, and then you need to make adjustments as necessary.

For example, a lot of times at year-end, people may need to readjust their weightings based on the performance over the course of the year to get back to their targeted allocations. So in the past couple of years, if you’re a typical 60/40 investor with the market as much as it’s gone up the past couple of years, you might want to sell some of the stock, reinvest back into fixed income to get to that 60/40 target. Or when we have market disruption periods, like earlier this year when we thought investors should go to an overweight, maybe if you’re a 60/40 investor, you want to go to like 70% or higher exposure in equities after the equity market has sold off enough to start looking attractive. Or conversely, like back at the beginning of 2022, when we noted that you should be underweight equities at that point in time, maybe you wanted to be 50/50 or even less than 50% of your equity allocation. Now, even then, within those equity allocations, I think that you can change your weightings by sectors, capitalization, or style in order to capture where we see the best value today.

Long explanation. Let me get back to what the actual question was. Looking at the Mag Seven today, a lot of these are undervalued, according to our equity analyst teams. Alphabet GOOGL, Microsoft MSFT, Amazon AMZN, Meta META are all 4-star-rated stocks today. Nvidia, 3-star-rated stock, whereas Apple AAPL and Netflix NFLX, both 2-star overvalued stocks. Now, I would expect that the stocks that are tied to AI—Nvidia, Alphabet, Microsoft, Amazon, Meta—are all probably going to be very correlated here in the short to medium term. If any one of these were to sell off, I think it probably is a factor that causes all of them to sell off, so I think you have a lot of correlation risk between those stocks.

As far as a 25-year set-and-forget strategy, I went back to January 2000 and looked at what were the largest market-cap stocks back then. Those included names like GE GE, Cisco CSCO, Intel INTC, Nokia NOK, which, at that point in time, I’m sure those stocks and their outlooks looked great. But I would just note that, over the past 25 years, those stocks have lagged the broad market pretty significantly over that time period.

So, if you’re investing in individual stocks, you need to have the mindset that you need to consistently monitor these stocks in your portfolio. Ongoing, just determine if there are any changes in the outlook that are different from your investment thesis, and you need to monitor the valuation. When they become overvalued and overextended, good time to take some profits off the table. And then conversely, when you get some sort of selloff, whether it’s the entire market or in individual stocks, if your investment thesis hasn’t changed, then that’s a good time to be able to dollar-cost average down.

Dziubinski: All right. Well, you just said the magic words: Take some profit. And actually Nick’s second question is about that phrase. He’s wondering, is there a certain percentage of the position when you say “take some profit.” Nick’s investing in a taxable account. And he said that he’d rather not give the government any more money than he needs to. We hear you on that. How do you actually go about taking some profit?

Sekera: I fully understand not wanting to pay the government anything more than you have to. And yes, as an investor, you do need to be aware of the tax implications of what you’re doing in your account. But at the same time, I’d also say don’t let taxes sway what actually should be the right thing to do in your own portfolio. So, of course, I can’t give specific advice on any one investment or trading. I think everyone needs to have their own style for investing. I can only speak to my own style. And I think it’s also going to be dependent on your individual situation and what your individual conviction is on any one individual stock. While we certainly do our best, we’re not always right. And there are certainly instances where our fair value maybe lags to the upside, lags to the downside, or maybe cases where we just didn’t get it right. You need to have your own investment thesis, I think, based partially at least on Morningstar, but having done your own research and due diligence as well.

Personally, when I have a stock that I like, I’m going to start with a partial position size. I then set a target to the downside. If it hits that target, I’m going to reevaluate my investment thesis. And based on that reevaluation, if nothing’s changed, I’m going to dollar-cost-average down. Or if it has changed, and I think that this is no longer a good investment, I’m going to take my hit, and I’m going to exit that position. You also need to set a target to your upside. Same thing. If it hits that target, evaluate whether or not anything has changed. If nothing has changed, sell a partial position, set your next target level. Or maybe if something has changed, and you think that there’s a lot more upside at that point because of that change, then maybe you go ahead and continue to keep owning it to the upside. Either way, you need to have your own strategy. Maybe it’s something as easy as buy a third position to start, set that target for the next third-size position that gets hit. Then you set that next target for that next third size. Or if you want to be a little more aggressive, start with a half or larger size position. And then, based on what your targets are, you can buy or sell another quarter-size position twice thereafter.