Lately that's been nothing but Target, but it might switch to nothing but Amazon next month, or 50% AMZN 50% something else, and so on. So it's just the new money coming into the account getting divvied up, but doesn't reflect the actual holdings of long term account as a whole (which might only be 20% TGT and 80% other stuff)
Based on your strategy you're probably incrementally purchasing and the selling in bulk so the sell commission isn't as damaging but losing 0.70% of an investment right off the bat makes it hard to be profitable. Even half that amount, if you increase your lots to $2,000, is painful.
Unexpected things really don't happen very often and black swan risk is way overblown. When things blow up - they're a long time coming - you just didn't see the data.
No, it's not stupid to concentrate wealth. Problems only arise when you do it stupidly, like buying too big a house, being part of the wrong family, living in the wrong country or buying an unsafe car.
Diversification does not reduce risk but it cuts your returns in half. All correlations go to one in a crisis and you can't hedge the end of the world.
Note: To all downvoters - putting all your eggs in multiple baskets does not protect you from an asteroid impact any more than a person with all eggs in one basket.
People who think diversification makes them safe are frankly wrong.
Indeed people who own a job, a car or a house are well advised to have insurance. And insurance is a form of diversification.
For countries the analogy is flimsy, but if you live in a country that has had any of: wars, dictators, property confiscation or high rate of violent crime in the recent past (which describes most of the non-developed world, including emerging countries), it's a good idea to have a passport and a way to move elsewhere.
If you want to diversify you need to actually buy reverse correlated assets. So go ahead - hedge with options, hedge with futures, hedge with shorting the indices.
But don't think buying disparate companies protects you - it doesn't.
This is basic personal finance. TBH, I'm really surprised your comments aren't all at the lightest shade of gray already.
I fully understand the arguments for diversification. Just like I fully understand CAPM, modern portfolio theory and the assumption that var=risk.
But it's all bullshit. Why are you investing in companies that have that risk? If you understand which companies return higher returns - why aren't you all in on them?
It's bloody hard to find good companies and when you do - why on earth would you diversify into their worse off counterparts? You need to have heavy concentration in great companies where you are perfectly fine having a 10 year hold on at the right price.
Either I'm misunderstanding your argument or you are missing a fundamental tenant of finance (and indeed, most things in life). Higher returns typically comes with higher risk. A brand new startup is high risk with high reward if it pays out. The same thing applies to financial investments in high risk companies.
People take risks because they want to try and beat the historical growth in their portfolio. By taking on that risk, they know that they may lose money instead of grow their money.
Diversifying allows them to adjust how much risk they want to take above the standard market growth.
"Great Companies" is such a bad guide star for investing. Sears looked like a "great company" 10 years ago. Kodak? Any big box retailer?
Anyway, there are perfectly sound investing theories that say investing in the worst companies can result in higher returns than any "great company" investment portfolio. Value investing at it's most extreme. You just need a few of the losers to become mediocre to make huge gains, while trying to get great companies to grow past their high stock price is extremely hard.
I agree with your long-term strategy...but I don't see any reason to hold long-term stakes in individual companies. Why not just hold long term on index funds?
Most of modern economic and finance theory is based on fundamentally broken models of risk and return.
Known risks and future returns are certainly correlated. Unknown risks (financial crisis meltdown) are obviously uncorrelated because they are unknown. You can't control for those, which is why you diversify.
What are you going to do when your "great company" has a horrible CEO scandal and sinks the company? That's an unknown risk that would be prevented by diversifying your investments.
Known risks (such as "can this company execute it's vision well enough to be profitable at 500m revenue/year?") are what you weigh against the return ("I personally think so, but the market doesn't, so I'm getting a discount on the stock price when it eventually succeeds").
Concentrating wealth in stock is a particularly dumb idea, because even public companies are relatively opaque. Enron looked like a pretty good deal to an outsider, right?
Using things like citizenship, cars, households and families is a straw man and not related to financial investment at all.
Stating that Enron was a good idea was like stating Groupon was a good idea. Commodity companies that buy revenue (includes WorldCom and MCI) are always bad investments. Once again - had you invested in them you would be a moron.
It'd be fair to state that diversification protects against stupidity.
However, it does not reduce risk in the way people assume.
It really isn't that bloody hard to see shit for what it was - if you aren't making any money, if you are buying revenue, and if your service is commodity then you will be both a bad investment and eventually go bankrupt. Enron, WorldCom, MCI, Zynga, Groupon, Pandora fit these cases and hence will fail.
It irritates me saying "Ohh who could've predicted the GFC, or Enron or WorldCom or the DotCom bubble or whatever". Just because you don't see the asteroid coming before it crashes - it does not follow that it was a black swan. Grab a telescope and you'd have seen it coming 30 years out.
If you aren't making money and your business model is neither defensible nor proprietary - you will go out of business.
But then again - why are you investing in companies that you believe have localised risk of bankruptcy and a low chance of attaining future profits.
Otherwise diversification often gives a false sense of security with higher systemic risk (see GFC).
That is a huge difference. The dot com bust affected (almost) all tech stocks, but they didn't all go bankrupt.
This has been the Amazon story basically since founding. At some point, a company needs to yield real returns on their investments.
However, my actual portfolio has done ok with Amazon so I'm not complaining.
These games teach high school students very little about investing, especially long term. The other team's strategy was simply "I play video games and I like Gamestop, so let's buy Gamestop!".
In order to win this a friend and I decided to team up and split the winnings. Basically what we did was to get one of us to buy the riskiest investments that we could (penny stocks, other low cap stocks, risky derivatives etc.) and the other would short them. This way over the course of the few weeks one of us would be dead last, and the other far ahead.
Worked like a charm.
In other words, revenue is nearly identical and there's no profit, presumably because of these new things.
Amazon is one of the few very large companies that has extremely high potential for growth. I made an OK amount of money buying them after post-earnings panic and selling 1 day to 60 days later this year and last.
If it ever goes back down to 190 I might throw some % of my long term money their way.
(100% of my long term money, which is about $1000 every two weeks, is currently just going to TGT, another long term big company that already has a dividend but still has plenty growth potential)
((90% of my short term money, on the other hand, was buying 10K shares of OCZ at 4.90. Now its at 1.36. Ouch!))