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What is the highest percentage you’d ever allocate to a single stock?
Your GE, Lucent experience resonates with me...I was a young buck in 87' when the schmeissing occured in the markets...the 50-something year old engineers were walking around shell shocked in the office with that far away gaze....looking back at the aftermath of 01'....was in many business meetings with said 50-something year olds who retired due to the run up in the stonk market in the mid-late 90's...I have no idea why they were hired back, they weren't into it, stilll were thinking of the golf course and what happened...then recently with the Covid bullshit....guys were walking around like someone ran their dog over...work buddy came back from a week in Vegas right before everything shut down, portfolio down -10%...in a week...guys lost a third of their portfolio in a month...now they are walking around with no care in the world, wonder if they done learnt anything from their experiences....
What is the most concerning is that when you look behind the bullshit numbers that the govt and their media shills put out you would have no idea that inflation could easily get even worse, many layoffs starting to happen, many companies going bankrupt, crime is out of control....I think we are headed towards a Germany kind of investing climate...folks there have very little in the markets, maybe the average portfolio is 10-15% exposed to stocks...a lot of insurance type of products (Allianz etc)...rental property if you are a baller....
"when you look behind the bullshit numbers that the govt and their media shills put out you would have no idea that inflation could easily get even worse, many layoffs starting to happen, many companies going bankrupt, crime is out of control...."
Says Baseball_Fan: "Uh, actually, I'm a moderate neither far right nor left..."
Sure sounds like it. For a "moderate" he's sure got an interesting and unusual view of the United States.
@msf: I also appreciate your contributions. At times I have thought you ran a research firm with countless assistants at your beck and call. Other than that explanation, my mind could not account for your depth of knowledge. Keep on keepin' on...
@MikeM- Yes sir, sad but true is exactly right. The exact same is also true of Trump. But ignoring these "patriots" simply allows their brand of lies, misinformation, and "alternate facts" to fester, gain converts, set us against each other, and poison the national spirit. Silence is akin to acquiescence.
@Old_Joe. Two ideas can both be right. While “silence is akin to acquiesce “ engagement with them gives them legitimacy. Which they don’t deserve. We live in mixed neighborhood. Several of them live near me. You can tell who they are because they leave their oversized American flags up 24/7, 365 and add many small ones on holidays. I ignore them as if they don’t exist. They have no legitimacy as neighbors or as fellow citizens.
@larryB- If that's true, then does the prosecution by the legal systems of the federal and state governments give Trump and his "associates" legitimacy? If the answer to that question is "yes", then it would seem that we should just not talk about them, and none of them should be prosecuted for anything.
I am speaking of his supporters. The homophobic, xenophobic, racist , anti semitic , gun worshippers. Those who would take rights and freedom from women and many voters.
Ben franklin said: ”Experience keeps a dear school. But a fool will learn in no other.”
Sometime in August I revamped my static portfolio, including in it a 10% allocation to a single stock. It’s one of the largest food distributors in the world. And everybody needs to eat. Right? Wasn’t blind. Had owned and followed this one for around a year, but in lesser amounts.
Anyhow, I ignored the combined wisdom of this board as well as warning flags from Fido’s (optional) portfolio analysis tool. The stock has fallen about 5-7% since than (but feels like more). Being in Europe, the company has been slammed by both the strong dollar and the new hysteria-causing weight reduction drugs like ozempic.
After less than a month I divided the investment in two, adding a second (domestic.) stock. That helped. But it was still a tough road in terms of daily volatility. So this week I chopped it down again, adding a 3rd U.S. stock. At roughly 3.33% of portfolio apiece the ride has become a lot smoother. Whew! Appreciated all the board insights into my query back than. Just wanted to report back.
(To be clear - I’m essentially a fund investor. The dalliance into stocks is new and limited to just the 3 noted.)
I'll answer the question in a different manner...most I would ever put in one stock (such as ACGL?) would be 6 to 12 months of salary if still working or if I wasn't, 6 to 12months of my best year while I was....depending on my portfolio size.
It's just a mental accounting thing for me...
The other thought process that I am in alignment with is the Taleb portfolio...85% in Tbills, safe assets, 15% let 'er rip aggressively.....with that I might go 7.5% x 2 to get to the 15%...
Interesting question....there has to be some kind of game theory answer that would make sense statistically, maybe?
I often find that my single-stock selections ying when the market in general yangs. Lately, that's often been a backdoor blessing. Biggest ever, so far? One just peeked its chin above 5% of my total portfolio. I hold 5 single stocks. A couple of them are still very tiny. I D-C-A into them in tiny bites. That suits me. It's my only option, strategically AND tactically. So, why beef about it? I get free money to play with every couple of weeks from the spouse-person.
Total single-stock portion is still less than 13% of the full portfolio.
If BB Fan means he’s 85% T-Bills that’s pretty conservative. Here: 47% equity / 30% bond / 15% short term and the rest “other”. I’ve always worked hard to keep volatility in check. The equity exposure is mostly through L/S funds & others that hedge in various ways. Very low volatility. Probably something along the lines of VWINX for daily and long term volatility. (Happy to say performance is superior - but VWINX seems to have fallen off a cliff lately). With some confidence volatility will remain low I’ve not much incentive to hold a lot of cash. I certainly understand the appeal of cash and would not question anyone’s decision to hold a lot. Just not how I’ve always done it.
Crash is correct that one advantage of including individual stocks is that they often move opposite the broader market and can help hedge volatility shorter term. Of course, it can sometimes work in reverse. And selection is important in that regard as well.
For those who do like to own individual stocks as a main investment tool to your overall portfolio, have you compared your stock selections to a broad based index fund like the S&)500 for large US stocks or a small stock ETF or a global ETF if using foreign stocks? It may be hard to compare and answer, but are you winning?
I'm comfortable playing individual stocks as a hobby but nothing more. And for me, alas, it's generally an expensive hobby.
For those who do like to own individual stocks as a main investment tool to your overall portfolio, have you compared your stock selections to a broad based index fund like the S&)500 for large US stocks or a small stock ETF or a global ETF if using foreign stocks? It may be hard to compare and answer, but are you winning?
I'm comfortable playing individual stocks as a hobby but nothing more. And for me, alas, it's generally an expensive hobby.
@MikeM - Not sure a 10% weighting to individual stocks counts as “a main investment tool”. Maybe others can better answer. Last year it helped my overall return to hold some individual stocks. Beginner’s luck. And I traded a lot more last year which helped as there were some extreme movements in stocks. Gets tired fast though. This year the individual stocks have worked against me. As I noted earlier, the global food conglomerate has been hit by both the strong dollar and the hysteria over new weight reduction meds. There’s a fear people will eat less. Also, the new med seems to curb drinking. So, without checking, I’d guess brewers have been hit. A lot of other sectors have been hit as well. But - at just 10% of portfolio, individual stocks are not that significant.
Could care less about the indexes. Try to stay as far as possible from the S&P. Herd mentality ISTM. The goal has never been about beating an index. Goal has always been to do somewhat better than cash over time with very low volatility. Of course, with cash, volatility is 0. And returns are predictable. Boils down to comfort level in the end.
The comparative measure doesn't necessarily need to be an index @hank. Heck, you have said you use comparative benchmarks before. It's essential I think. If someone wants to trade stocks, measure results against a stock portfolio like BRK.B for instance. If you beat that over time you should be doing stock picking for a living. But couldn't an amateur stock picker be fooling themselves to think they are doing better picking stocks than say a professional manger? Say, Warren Buffet, again a comparison reference to BRK. Especially true for smaller less traded stocks I would think. And I believe if reducing volatility is a goal, buying individual stocks, especially small stocks, flies in the face of that goal in my opinion.
I do think 1 stock at 10% of a portfolio is pretty significant. 5 stocks? Yeah I still do. 10 stocks? Less significant I suppose, only because of reduced volatility and the greater chance to get ETF-like results.
I do agree it boils down to comfort level in the end.
@MikeM - I’m not in Warren Buffett’s league. Nor do I expect, or even hope, the 3 equities I hold (3.33% each) will perform better than Buffett’s Berkshire. So, for those who want to duplicate Buffett’s return, they should put 100% into BRK. They would, ISTM, be assured of earning whatever Buffett does.
You also make the case for owning funds over individual equities. I agree on that point as a general rule. 90% of my assets are in funds. What I see in having some limited stock holdings are (1) an opportunity to dampen the volatility of an “all fund” portfolio and (2) a way to reduce average management fees across the portfolio. To be sure, those potential benefits come at increased risk. No two ways about it.
I have no long term record of owning individual stocks (umm …only 2-3 years). So you might be right that “average” retail investors (like you and me) should not own individual stocks - that it’s an area only for professionals like Buffett to participate in. I really can’t say. I was simply trying honestly to answer your earlier questions which I took as:
- Has exposure to individual stocks helped or hurt your overall return? (both)
- Have you compared your individual stocks’ performance to a broader index? (no)
To Mike’s point - Re ”comparative indexes”.
Mike, I track about 20 mutual funds / etfs (and 1 stock) daily for clues about volatility. I especially like to look at VWINX, PRWCX, BRK.B, PRSIX, AOK, ABRZX, TMSRX, BAMBX.
For performance longer term I like to watch TRRIX, PRPFX, VWINX. But - No, I have no objective measure of how I’m doing. Take whatever the market gives me. Keep volatility low. Enjoy the ride.
Comments
Your GE, Lucent experience resonates with me...I was a young buck in 87' when the schmeissing occured in the markets...the 50-something year old engineers were walking around shell shocked in the office with that far away gaze....looking back at the aftermath of 01'....was in many business meetings with said 50-something year olds who retired due to the run up in the stonk market in the mid-late 90's...I have no idea why they were hired back, they weren't into it, stilll were thinking of the golf course and what happened...then recently with the Covid bullshit....guys were walking around like someone ran their dog over...work buddy came back from a week in Vegas right before everything shut down, portfolio down -10%...in a week...guys lost a third of their portfolio in a month...now they are walking around with no care in the world, wonder if they done learnt anything from their experiences....
What is the most concerning is that when you look behind the bullshit numbers that the govt and their media shills put out you would have no idea that inflation could easily get even worse, many layoffs starting to happen, many companies going bankrupt, crime is out of control....I think we are headed towards a Germany kind of investing climate...folks there have very little in the markets, maybe the average portfolio is 10-15% exposed to stocks...a lot of insurance type of products (Allianz etc)...rental property if you are a baller....
Just buy Nivida though right?
Says Baseball_Fan: "Uh, actually, I'm a moderate neither far right nor left..."
Sure sounds like it. For a "moderate" he's sure got an interesting and unusual view of the United States.
@larryB- If that's true, then does the prosecution by the legal systems of the federal and state governments give Trump and his "associates" legitimacy? If the answer to that question is "yes", then it would seem that we should just not talk about them, and none of them should be prosecuted for anything.
Sometime in August I revamped my static portfolio, including in it a 10% allocation to a single stock. It’s one of the largest food distributors in the world. And everybody needs to eat. Right? Wasn’t blind. Had owned and followed this one for around a year, but in lesser amounts.
Anyhow, I ignored the combined wisdom of this board as well as warning flags from Fido’s (optional) portfolio analysis tool. The stock has fallen about 5-7% since than (but feels like more). Being in Europe, the company has been slammed by both the strong dollar and the new hysteria-causing weight reduction drugs like ozempic.
After less than a month I divided the investment in two, adding a second (domestic.) stock. That helped. But it was still a tough road in terms of daily volatility. So this week I chopped it down again, adding a 3rd U.S. stock. At roughly 3.33% of portfolio apiece the ride has become a lot smoother. Whew! Appreciated all the board insights into my query back than. Just wanted to report back.
(To be clear - I’m essentially a fund investor. The dalliance into stocks is new and limited to just the 3 noted.)
It's just a mental accounting thing for me...
The other thought process that I am in alignment with is the Taleb portfolio...85% in Tbills, safe assets, 15% let 'er rip aggressively.....with that I might go 7.5% x 2 to get to the 15%...
Interesting question....there has to be some kind of game theory answer that would make sense statistically, maybe?
Best Regards,
Baseball Fan
Total single-stock portion is still less than 13% of the full portfolio.
Crash is correct that one advantage of including individual stocks is that they often move opposite the broader market and can help hedge volatility shorter term. Of course, it can sometimes work in reverse. And selection is important in that regard as well.
I'm comfortable playing individual stocks as a hobby but nothing more. And for me, alas, it's generally an expensive hobby.
Could care less about the indexes. Try to stay as far as possible from the S&P. Herd mentality ISTM. The goal has never been about beating an index. Goal has always been to do somewhat better than cash over time with very low volatility. Of course, with cash, volatility is 0. And returns are predictable. Boils down to comfort level in the end.
I do think 1 stock at 10% of a portfolio is pretty significant. 5 stocks? Yeah I still do. 10 stocks? Less significant I suppose, only because of reduced volatility and the greater chance to get ETF-like results.
I do agree it boils down to comfort level in the end.
You also make the case for owning funds over individual equities. I agree on that point as a general rule. 90% of my assets are in funds. What I see in having some limited stock holdings are (1) an opportunity to dampen the volatility of an “all fund” portfolio and (2) a way to reduce average management fees across the portfolio. To be sure, those potential benefits come at increased risk. No two ways about it.
I have no long term record of owning individual stocks (umm …only 2-3 years). So you might be right that “average” retail investors (like you and me) should not own individual stocks - that it’s an area only for professionals like Buffett to participate in. I really can’t say. I was simply trying honestly to answer your earlier questions which I took as:
- Has exposure to individual stocks helped or hurt your overall return? (both)
- Have you compared your individual stocks’ performance to a broader index? (no)
To Mike’s point - Re ”comparative indexes”.
Mike, I track about 20 mutual funds / etfs (and 1 stock) daily for clues about volatility. I especially like to look at VWINX, PRWCX, BRK.B, PRSIX, AOK, ABRZX, TMSRX, BAMBX.
For performance longer term I like to watch TRRIX, PRPFX, VWINX. But - No, I have no objective measure of how I’m doing. Take whatever the market gives me. Keep volatility low. Enjoy the ride.
Hope that answers your question.