What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

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steve321
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What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by steve321 » Mon Sep 03, 2018 2:31 pm

I am currently indexing but I am having more and more doubts about my strategy. I have voiced some of my doubts in my thread on Mr West. I am now contemplating the possibility of putting a big chunck of money in Amazon and Alphabet (say 1M£ in each). Here's the reason
1. Alphabet has been compared to a tech stock ETF, because they invest in many small tech companies (besides Google). So it's quite diversified.
2. I've had some experience with Amazon as a customer and I realised that unlike other companies, that are interested in making a quick buck, Amazon is building for the long term future. They want to please you as a customer like nobody else does, it doesn't matter if they lose money through refunding you (no questions asked). This long term mentality is hugely impressive, I think they are set to conquer the world.
So what can go wrong with this? What's the Bogleheads' reason for avoiding such investment style? Alphabet in particular is quite diversified; and Amazon is a formidable business.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by wootwoot » Mon Sep 03, 2018 2:32 pm

It's hard to tell if this is a serious question...

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by UpperNwGuy » Mon Sep 03, 2018 2:35 pm

All it takes is one data breach or one major scandal with how data is used, and the stock of either one of those companies will come tumbling down. Remember what happened to Facebook a few months ago?

By the way, NBC Nightly News either just did or is about to do a major exposé of Amazon's abuse of its workers in the shipping department.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by Tycoon » Mon Sep 03, 2018 2:37 pm

If putting your money in Alphabet and Amazon is something that you feel strongly about, do it. The best lessons in life are learned the hard way. I hope it turns out well.
Appeal to Pity:When pity is envoked to support a statement | Appeal to Popular Sentiment:Appealing to unrelated prejudices and attitudes | Hasty Generalization:Too little evidence to support the conclusion

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by steve321 » Mon Sep 03, 2018 2:39 pm

concerning Alphabet (and Amazon too), I've seen some very good arguments here:
https://www.youtube.com/watch?v=XYTqrWO1_fk
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by camillus » Mon Sep 03, 2018 2:42 pm

Go for it! What could go wrong?

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by jayk238 » Mon Sep 03, 2018 2:43 pm

Lot of trolling this labor day.
Where is the popcorn.
This site is better than a movie!

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by FiveK » Mon Sep 03, 2018 2:45 pm

Enron and Kodak? Among others....

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by wootwoot » Mon Sep 03, 2018 2:46 pm

jayk238 wrote:
Mon Sep 03, 2018 2:43 pm
Lot of trolling this labor day.
Where is the popcorn.
This site is better than a movie!
Post quality is taking a nosedive on this forum. Between this and the Kanye post earlier trolling is clearly becoming more of a problem.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by steve321 » Mon Sep 03, 2018 2:49 pm

wootwoot wrote:
Mon Sep 03, 2018 2:46 pm
jayk238 wrote:
Mon Sep 03, 2018 2:43 pm
Lot of trolling this labor day.
Where is the popcorn.
This site is better than a movie!
Post quality is taking a nosedive on this forum. Between this and the Kanye post earlier trolling is clearly becoming more of a problem.
ok, if you think this is trolling, could you please explain why the Kanye investment was discussed in Jonathan Clements Humbledollar?

and concering these two stocks I am contemplating, could you explain why these two experts, which have very widely read blogs and many Twitter followers, concentrate on them in this video (please note the title of the video)?
https://www.youtube.com/watch?v=XYTqrWO1_fk
I also don't see whay it should be irrational for me to put one million £ in Amazon when Bezos (who is certainly smart) has more than 100 billions USD in that Stock (and a larger fraction of his net worth).
Last edited by steve321 on Mon Sep 03, 2018 2:57 pm, edited 1 time in total.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by nisiprius » Mon Sep 03, 2018 2:54 pm

steve321, read my posting on Dow 36,000's Stock Picks. Those authors, based on very sensible and conservative criteria, identified
three [stocks] that illustrate the Dow 36,000 Theory in practice:
  • General Electric ("GE is increasing its dividends at twice that pace... [in mid-1999] it was by our conservative standards trading two-thirds below its perfectly reasonable price.")
  • Microsoft ("meets the Schlang criteria with ease.")
  • and Tootsie Roll. ("We're still dazzled by Tootsie Roll.... could triple before bursting out of our comfort zone.")
Glassman and Hassett say, on page 251, "One way to spread your money is to put all of it into a Wilshire 5000 index, such as Vanguard Total Stock Market Fund. That's acceptable to us, but it's not ideal."
The point is that at the time, I think most people would have agreed with them that these were big, safe companies that couldn't possibly go too far wrong. I think the only criticism would have been that they were playing it too safe.

GE, in particular, was one of the original companies in the Dow Jones Industrial Average. It was one of the biggest companies in the world. And it was widely considered to be one of the best-managed in the world. And it was "diversified." It was in something like 30 separate businesses, almost all of them within the top three companies in their business in the world. It was far, far more diversified than Google or Amazon could ever dream of being. Updating the chart I made at the time, there's what would have happened if you'd invested $10,000 in each of their three chosen companies on 11/17/1999, versus Vanguard Total Stock Market Index (blue).
[url=http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D]
Image

As you see, Total Stock beat two out of three of those stocks. Much more important: the stock that beat Total Stock only beat it by a little, while the stocks that lost to it lost by a lot. A whole lot.

If you'd put $30,000 all into Total Stock, you'd now have 3 x 31,982.33 = $95,946.99.

If you'd put $10,000 each into of these seemingly conservative, safe, great company, sure thing, blue chips, you'd now have $21,481.86 + $4,922.17 + $39,149.15 = $65,553.18

It is not easy to beat the stock market. It looks easy, but it's not. It seems as if there are any number of "obviously" great companies that are almost sure to do as well or better than the whole market, it's just a question of how much better. It seems that way, but it's not so.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by prudent » Mon Sep 03, 2018 2:56 pm

It seems you are determined to pick individual stocks. You have already seen all the arguments that caution against that strategy. Even so, it might work out better for you than staying with index funds if you pick the right stocks. Or it might not.

People with a long-term view of their investments are satisfied with market returns because of reduced risk and a lot less stress. Some stocks will do better than market returns, some worse. Many of us here know that 95% of professionals cannot beat the market so we don't feel it's worth the time and effort and increased risk to try given the long odds of winning. The members here tend to be long-term investors. That's a proven road to success.

There's nothing "wrong" with betting big on a couple stocks. If you understand the risks, and still think it's a good idea, then it's right for you. It's only wrong for people who don't understand how risky that is and how slim their chances are of beating the market over the long term, because they don't know what they don't know.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by spectec » Mon Sep 03, 2018 2:58 pm

I think you have a great plan - for you.
Just follow Will Rogers' advice on my signature line and you can't go wrong.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by ChinchillaWhiplash » Mon Sep 03, 2018 3:00 pm

Could continue to do quite well for many more years. No one knows. Could also falter like the giant GE which is also a huge conglomerate that is highly diversified. Many things could bring a company down at any time. Happens to all of them at some point. Some rebound, some don't. So far, the overall stock markets have always rebounded. Not worth the risk IMO. I won't get rich from individual stocks though :greedy
Last edited by ChinchillaWhiplash on Mon Sep 03, 2018 3:01 pm, edited 1 time in total.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by Jags4186 » Mon Sep 03, 2018 3:01 pm

nisiprius wrote:
Mon Sep 03, 2018 2:54 pm
steve321, read my posting on Dow 36,000's Stock Picks. Those authors, based on very sensible and conservative criteria, identified
three [stocks] that illustrate the Dow 36,000 Theory in practice:
  • General Electric ("GE is increasing its dividends at twice that pace... [in mid-1999] it was by our conservative standards trading two-thirds below its perfectly reasonable price.")
  • Microsoft ("meets the Schlang criteria with ease.")
  • and Tootsie Roll. ("We're still dazzled by Tootsie Roll.... could triple before bursting out of our comfort zone.")
Glassman and Hassett say, on page 251, "One way to spread your money is to put all of it into a Wilshire 5000 index, such as Vanguard Total Stock Market Fund. That's acceptable to us, but it's not ideal."
The point is that at the time, I think most people would have agreed with them that these were big, safe companies that couldn't possibly go too far wrong. I think the only criticism would have been that they were playing it too safe.

GE, in particular, was one of the original companies in the Dow Jones Industrial Average. It was one of the biggest companies in the world. And it was widely considered to be one of the best-managed in the world. And it was "diversified." It was in something like 30 separate businesses, almost all of them within the top three companies in their business in the world. It was far, far more diversified than Google or Amazon could ever dream of being. Updating the chart I made at the time, there's what would have happened if you'd invested $10,000 in each of their three chosen companies on 11/17/1999, versus Vanguard Total Stock Market Index (blue).
[url=http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D]
Image

As you see, Total Stock beat two out of three of those stocks. Much more important: the stock that beat Total Stock only beat it by a little, while the stocks that lost to it lost by a lot. A whole lot.

If you'd put $30,000 all into Total Stock, you'd now have 3 x 31,982.33 = $95,946.99.

If you'd put $10,000 each into of these seemingly conservative, safe, great company, sure thing, blue chips, you'd now have $21,481.86 + $4,922.17 + $39,149.15 = $65,553.18

It is not easy to beat the stock market. It looks easy, but it's not. It seems as if there are any number of "obviously" great companies that are almost sure to do as well or better than the whole market, it's just a question of how much better. It seems that way, but it's not so.
What's most interesting about this post is how apparently Tootsie Roll was completely unaffected by both the recession and the recovery.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by daveydoo » Mon Sep 03, 2018 3:02 pm

steve321 wrote:
Mon Sep 03, 2018 2:39 pm
concerning Alphabet (and Amazon too), I've seen some very good arguments here:
https://www.youtube.com/watch?v=XYTqrWO1_fk
Youtube arguments tend to be the strongest :D
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by steve321 » Mon Sep 03, 2018 3:09 pm

daveydoo wrote:
Mon Sep 03, 2018 3:02 pm
steve321 wrote:
Mon Sep 03, 2018 2:39 pm
concerning Alphabet (and Amazon too), I've seen some very good arguments here:
https://www.youtube.com/watch?v=XYTqrWO1_fk
Youtube arguments tend to be the strongest :D
these guys at Ritholz seem smart; they champion using index funds for some investors and they have an 'evidence based investment conference' relying on academic work. The medium through which they voice their opinions (Youtube in this case) seems quite irrelevant to me.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by Beensabu » Mon Sep 03, 2018 3:14 pm

You may want to take a look at the top 10 S&P 500 companies every year from 1980 to 2013:

Visual History Of The S&P 500

These are the current top 10 constituents at this point in time:

Apple Inc.
Microsoft Corp
Amazon.com Inc
Facebook Inc A FB
Berkshire Hathaway B
JP Morgan Chase & Co
Alphabet Inc C
Alphabet Inc A
Johnson & Johnson
Exxon Mobil Corp

If you go to the link above and check various years, you will see how the top 10 companies change. Some move positions on the top 10. Some drop off completely, even from the #1 spot, never to return. Thus, a cap-weighted index fund.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by daveydoo » Mon Sep 03, 2018 3:18 pm

steve321 wrote:
Mon Sep 03, 2018 3:09 pm
daveydoo wrote:
Mon Sep 03, 2018 3:02 pm
steve321 wrote:
Mon Sep 03, 2018 2:39 pm
concerning Alphabet (and Amazon too), I've seen some very good arguments here:
https://www.youtube.com/watch?v=XYTqrWO1_fk
Youtube arguments tend to be the strongest :D
these guys at Ritholz seem smart; they champion using index funds for some investors and they have an 'evidence based investment conference' relying on academic work. The medium through which they voice their opinions (Youtube in this case) seems quite irrelevant to me.
OK, then I will go back to attacking the message, like I should have from the beginning.

Every investment scheme is "evidence-based." Almost every prediction about the future is "evidence-based." As has been said more times than I can count here, if you had a "formula" that worked, would you be hosting investment conferences at the airport Hilton or would you be on your mega-yacht? :D

Why not just pick one of those two stocks -- the better one? Who needs the diversification of two tech stocks? Same argument.
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by KyleAAA » Mon Sep 03, 2018 3:19 pm

steve321 wrote:
Mon Sep 03, 2018 2:31 pm
I am currently indexing but I am having more and more doubts about my strategy. I have voiced some of my doubts in my thread on Mr West. I am now contemplating the possibility of putting a big chunck of money in Amazon and Alphabet (say 1M£ in each). Here's the reason
1. Alphabet has been compared to a tech stock ETF, because they invest in many small tech companies (besides Google). So it's quite diversified.
2. I've had some experience with Amazon as a customer and I realised that unlike other companies, that are interested in making a quick buck, Amazon is building for the long term future. They want to please you as a customer like nobody else does, it doesn't matter if they lose money through refunding you (no questions asked). This long term mentality is hugely impressive, I think they are set to conquer the world.
So what can go wrong with this? What's the Bogleheads' reason for avoiding such investment style? Alphabet in particular is quite diversified; and Amazon is a formidable business.
Huh? Alphabet isn’t at all diversified. While their other bets category has grown and a few have graduated to bonafide products, the large majority of google’s revenue stills comes from ads. It can still be rightly called a one trick pony. Granted, it’s a really nice pony. Whoever made that comparison has no idea what they’re talking about. It is not at all diversified and even a cursory glance at their SEC filings will tell you that.

I wouldn’t bet against Amazon, but I wouldn’t bet 50% of my portfolio with it, either.
Last edited by KyleAAA on Mon Sep 03, 2018 3:21 pm, edited 1 time in total.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by Tycoon » Mon Sep 03, 2018 3:20 pm

steve321 wrote:
Mon Sep 03, 2018 3:09 pm
daveydoo wrote:
Mon Sep 03, 2018 3:02 pm
steve321 wrote:
Mon Sep 03, 2018 2:39 pm
concerning Alphabet (and Amazon too), I've seen some very good arguments here:
https://www.youtube.com/watch?v=XYTqrWO1_fk
Youtube arguments tend to be the strongest :D
these guys at Ritholz seem smart; they champion using index funds for some investors and they have an 'evidence based investment conference' relying on academic work. The medium through which they voice their opinions (Youtube in this case) seems quite irrelevant to me.
Steve321 why are you arguing? You've got the evidence and it's backed up by academic work. There is no need for validation, go! Pull the trigger already.
Appeal to Pity:When pity is envoked to support a statement | Appeal to Popular Sentiment:Appealing to unrelated prejudices and attitudes | Hasty Generalization:Too little evidence to support the conclusion

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by steve321 » Mon Sep 03, 2018 3:21 pm

Beensabu wrote:
Mon Sep 03, 2018 3:14 pm
You may want to take a look at the top 10 S&P 500 companies every year from 1980 to 2013:

Visual History Of The S&P 500

These are the current top 10 constituents at this point in time:

Apple Inc.
Microsoft Corp
Amazon.com Inc
Facebook Inc A FB
Berkshire Hathaway B
JP Morgan Chase & Co
Alphabet Inc C
Alphabet Inc A
Johnson & Johnson
Exxon Mobil Corp

If you go to the link above and check various years, you will see how the top 10 companies change. Some move positions on the top 10. Some drop off completely, even from the #1 spot, never to return. Thus, a cap-weighted index fund.
nice link, very instructive, thanks. I only regret it stops at 2013.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by steve321 » Mon Sep 03, 2018 3:25 pm

KyleAAA wrote:
Mon Sep 03, 2018 3:19 pm
. Whoever made that comparison has no idea what they’re talking about.
It's in the Youtube video I posted the link to above. Towards the end if my memory serves me He says that they invest in plenty of small tech companies, it's a conglomerate like Berkshire.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by rob » Mon Sep 03, 2018 3:26 pm

Why pick one? Pick the winner and put everything on it..... You might end up a lot richer... or not...
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by KyleAAA » Mon Sep 03, 2018 3:29 pm

steve321 wrote:
Mon Sep 03, 2018 3:25 pm
KyleAAA wrote:
Mon Sep 03, 2018 3:19 pm
. Whoever made that comparison has no idea what they’re talking about.
It's in the Youtube video I posted the link to above. Towards the end if my memory serves me He says that they invest in plenty of small tech companies, it's a conglomerate like Berkshire.
You should probably read their actual financial statements. Yes, Google makes acquisitions like any other large company. They don't make large acquisitions, at least not since youtube. It is in no way anything like Berkshire Hathaway. I'm afraid your source is full of it.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by nedsaid » Mon Sep 03, 2018 3:31 pm

steve321 wrote:
Mon Sep 03, 2018 2:31 pm
I am currently indexing but I am having more and more doubts about my strategy. I have voiced some of my doubts in my thread on Mr West. I am now contemplating the possibility of putting a big chunck of money in Amazon and Alphabet (say 1M£ in each). Here's the reason
1. Alphabet has been compared to a tech stock ETF, because they invest in many small tech companies (besides Google). So it's quite diversified.
2. I've had some experience with Amazon as a customer and I realised that unlike other companies, that are interested in making a quick buck, Amazon is building for the long term future. They want to please you as a customer like nobody else does, it doesn't matter if they lose money through refunding you (no questions asked). This long term mentality is hugely impressive, I think they are set to conquer the world.
So what can go wrong with this? What's the Bogleheads' reason for avoiding such investment style? Alphabet in particular is quite diversified; and Amazon is a formidable business.
It is never a good idea to concentrate your investments too much, particularly in the area of individual stocks. But it is your money and your life and you can do what you want. I hope it works well for you. The problem is that this goes against pretty much everything that we advise here on the Bogleheads. So proceed at your own risk.
A fool and his money are good for business.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by vineviz » Mon Sep 03, 2018 3:32 pm

steve321 wrote:
Mon Sep 03, 2018 2:49 pm
ok, if you think this is trolling, could you please explain why the Kanye investment was discussed in Jonathan Clements Humbledollar?

and concering these two stocks I am contemplating, could you explain why these two experts, which have very widely read blogs and many Twitter followers, concentrate on them in this video (please note the title of the video)?
https://www.youtube.com/watch?v=XYTqrWO1_fk
Well if two guys with Twitter and YouTube accounts are suggesting it, I can see why you might think that nothing can go wrong.

There are literally eight or more people who have Nobel Prizes specifically for explaining "what's wrong with putting most of my money into two stocks".

The Wiki on this site covers many of the reasons, of course.

Behavioral Pitfalls
https://www.bogleheads.org/wiki/Behavio ... l_pitfalls

Diversification
https://www.bogleheads.org/wiki/Diversification

Risk and Return
https://www.bogleheads.org/wiki/Risk_an ... troduction
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by steve321 » Mon Sep 03, 2018 3:33 pm

rob wrote:
Mon Sep 03, 2018 3:26 pm
Why pick one? Pick the winner and put everything on it..... You might end up a lot richer... or not...
Personally I'd go for Amazon. They just have a different frame of mind - like the ancient Romans they build for the long term (for eternity I was going to say). I was flabbergasted when I tried Prime and Fresh and saw how they operated, they do everything to delight the customer, even at a temporary loss I imagine - unike others who are just after a quick short term profit. To me it's clear they are out there to conquer the world.
But - I can't be 100% certain, so Alphabet is a good bet too. Besides, I've read a book on Bezos and I've learnt that he invested in Google ealier on and he might still have more than a billion worth of shares in Alphabet.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by prudent » Mon Sep 03, 2018 3:34 pm

steve321, do you have any more specific questions on this topic? It looks like things are getting repetitive, and all sides of the issue have been discussed.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by steve321 » Mon Sep 03, 2018 3:36 pm

vineviz wrote:
Mon Sep 03, 2018 3:32 pm
steve321 wrote:
Mon Sep 03, 2018 2:49 pm
ok, if you think this is trolling, could you please explain why the Kanye investment was discussed in Jonathan Clements Humbledollar?

and concering these two stocks I am contemplating, could you explain why these two experts, which have very widely read blogs and many Twitter followers, concentrate on them in this video (please note the title of the video)?
https://www.youtube.com/watch?v=XYTqrWO1_fk
Well if two guys with Twitter and YouTube accounts are suggesting it, I can see why you might think that nothing can go wrong.

There are literally eight or more people who have Nobel Prizes specifically for explaining "what's wrong with putting most of my money into two stocks".
ok but I remember that Charlie Munger spoke of Nobel Prize winner who was having his own money managed by Bershire whilst extolling the qualities of idexing.
Also, if concentrating is so silly, why does someone as smart as Bezos do it?
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by arcticpineapplecorp. » Mon Sep 03, 2018 3:38 pm

steve321 wrote:
Mon Sep 03, 2018 3:25 pm
KyleAAA wrote:
Mon Sep 03, 2018 3:19 pm
. Whoever made that comparison has no idea what they’re talking about.
It's in the Youtube video I posted the link to above. Towards the end if my memory serves me He says that they invest in plenty of small tech companies, it's a conglomerate like Berkshire.
Re-read your statement. If you look closely, you see the fallacy of your argument.

Berkshire is more diverisifed then Alphabet because they invest in different types of companies and they own large and small and value and growth. You say Alphabet invests in plenty of "small tech companies". That to me doesn't sound particularly well diversified. Diversification isn't just about the number of companies you own, but also about the different types, sizes, styles, sectors, countries. The total world market gets you all that. Alphabet doesn't.

If you're planning on betting a million pounds in each, what percentage does that 2 million represent overall? That's worth knowing and considering.

The time to have bought these two companies you covet is in the past when they were much cheaper. Do you think it's easier for a mega-large company to double in size or a smaller company to do so?
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by amitb00 » Mon Sep 03, 2018 3:38 pm

I personally am happy with Total Stock Market index. However I feel that FAANG stocks will beat Total Stock Index for foreseeable future. So go for it and also update us periodically.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by steve321 » Mon Sep 03, 2018 3:39 pm

prudent wrote:
Mon Sep 03, 2018 3:34 pm
steve321, do you have any more specific questions on this topic? It looks like things are getting repetitive, and all sides of the issue have been discussed.
prudent, I have a question on the risks you mentioned in you previous post; basically if it's so risky why are people who have gotten very rich, like Bezos, and don't need to get richer but should be more interested in capital preservation - why are they concentrated in a single stock instead of indexing?
What's the specific risk? Could Amazon go to zero?!
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by arcticpineapplecorp. » Mon Sep 03, 2018 3:42 pm

steve321 wrote:
Mon Sep 03, 2018 3:36 pm
ok but I remember that Charlie Munger spoke of Nobel Prize winner who was having his own money managed by Bershire whilst extolling the qualities of idexing.
Also, if concentrating is so silly, why does someone as smart as Bezos do it?
Charlie can apparently afford to take the risk. But Warren has advised his trustees to put 90% his holdings into the S&P500 (preferably with Vanguard) and 10% in treasuries for the benefit of his wife.

Regarding Bezos, he may have billions invested in Amazon, but do you think 100% of his net worth is tied up in it? It might, but I surely don't know. And even if he did, that doesn't make it right. He could be taking far more risk than is prudent. It might work out for him, or it might not. The ballgame's not over yet.

Even in the worst case scenario (if Amazon went belly up), I'm sure Bezos could get another job to support his family. How would you fare if you lost your 2 million pounds?
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by arcticpineapplecorp. » Mon Sep 03, 2018 3:44 pm

steve321 wrote:
Mon Sep 03, 2018 3:39 pm
prudent wrote:
Mon Sep 03, 2018 3:34 pm
steve321, do you have any more specific questions on this topic? It looks like things are getting repetitive, and all sides of the issue have been discussed.
prudent, I have a question on the risks you mentioned in you previous post; basically if it's so risky why are people who have gotten very rich, like Bezos, and don't need to get richer but should be more interested in capital preservation - why are they concentrated in a single stock instead of indexing?
What's the specific risk? Could Amazon go to zero?!
Yes, Amazon could go to zero. Any individual company can. Many have. Many that nobody ever thought would, but then did. The future's unknown. You eliminate all the risks you can (like stock risk, sector risk, size risk, style risk, country risk and manager risk) and only leave yourself with the risk you have to take (market risk) to get the return of the market. You can even mitigate market risk to a degree by holding a non-correlating asset like high quality bonds that probably will zig when the market zags. Own the total market and get the returns you deserve. Stray from that and you'll get something different. And it might not be what you expect. How are you with tracking error?
Last edited by arcticpineapplecorp. on Mon Sep 03, 2018 3:45 pm, edited 2 times in total.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by jdb » Mon Sep 03, 2018 3:44 pm

Amazon now the most shorted stock, having overtaken TSLA. As an outlier on this site say of course, and assuming this is legit post, go for it. Not sure about all your equity. Think you have to be mostly index funds to be able to post on this site. I have had 25% of my equity allocation past 6 years in 4 individual stocks, the two you mentioned plus Apple and Tesla. Rest in Vanguard index funds plus my favorite, Primecap. My individual stocks and Primecap have done far better than indexing. But I sleep better at night with majority in index fund, plus I can post on this site. So suggest not more than 25% of your equity allocation. And also suggest a good dollop of bonds for ballast. Good luck.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by steve321 » Mon Sep 03, 2018 3:45 pm

arcticpineapplecorp. wrote:
Mon Sep 03, 2018 3:38 pm
steve321 wrote:
Mon Sep 03, 2018 3:25 pm
KyleAAA wrote:
Mon Sep 03, 2018 3:19 pm
. Whoever made that comparison has no idea what they’re talking about.
It's in the Youtube video I posted the link to above. Towards the end if my memory serves me He says that they invest in plenty of small tech companies, it's a conglomerate like Berkshire.
Re-read your statement. If you look closely, you see the fallacy of your argument.

Berkshire is more diverisifed then Alphabet because they invest in different types of companies and they own large and small and value and growth. You say Alphabet invests in plenty of "small tech companies". That to me doesn't sound particularly well diversified. Diversification isn't just about the number of companies you own, but also about the different types, sizes, styles, sectors, countries. The total world market gets you all that. Alphabet doesn't.

If you're planning on betting a million pounds in each, what percentage does that 2 million represent overall? That's worth knowing and considering.

The time to have bought these two companies you covet is in the past when they were much cheaper. Do you think it's easier for a mega-large company to double in size or a smaller company to do so?
The total for the 2 stocks (2 millions) would be 30% of our liquid worth though well below 20% of our worth if we consider our rental properties.
Yes you are right, of course it would have been much better to spot them earlier on when they were smaller. I was solely interested in real estate though at the time; so I missed out.
Last edited by steve321 on Mon Sep 03, 2018 3:47 pm, edited 1 time in total.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by MiddleOfTheRoad » Mon Sep 03, 2018 3:46 pm

You have FOMO. Snap out of it.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by arcticpineapplecorp. » Mon Sep 03, 2018 3:51 pm

steve321 wrote:
Mon Sep 03, 2018 3:45 pm
That'd be 15% of our liquid worth though well below 10% if we consider our rental properties.
Yes you are right, of course it would have been much better to spot them earlier on when they were smaller. I was solely interested in real estate though at the time; so I missed out.
Yes, as MiddleoftheRoad said, I also believe you have FOMO. You always will. But if you own the market you'll have everything and you can't be missing out. If someone brags they've got Amazon, so do you (in the correct proportion of the market).

So if you'd be prepared to lose 10% or 15% of your net worth and you understand the risks you're taking, then let us know how it goes.

One other thought, if you buy $2 million pounds worth of shares, don't you supect the person(s) you're buying those shares from suspects Amazon and Alphabets best days are behind, not in front of them? They'd have to right? Because if they thought otherwise (and the best days are ahead) wouldn't they hold on to their stock (rather than sell it to you) and sell it later at an even higher price?

The people you're buying the shares from therefore think the stock price will go down in the future, while you think it will go up. Only one will be right.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by arcticpineapplecorp. » Mon Sep 03, 2018 3:53 pm

steve321 wrote:
Mon Sep 03, 2018 3:45 pm
The total for the 2 stocks (2 millions) would be 30% of our liquid worth though well below 20% of our worth if we consider our rental properties.
Yes you are right, of course it would have been much better to spot them earlier on when they were smaller. I was solely interested in real estate though at the time; so I missed out.
Now you're saying those two stocks would be 30% of your net worth, but the previous post you said it would be less. What's going on here?
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by JoeRetire » Mon Sep 03, 2018 3:53 pm

steve321 wrote:
Mon Sep 03, 2018 2:31 pm
So what can go wrong with this?
Lots. How lucky do you feel?
You will be purchasing some expensive stocks.
What's the Bogleheads' reason for avoiding such investment style? Alphabet in particular is quite diversified;
I don't think "diversified" means what you think it means.
and Amazon is a formidable business.
They are formidable. Today.
How long to you imagine they will remain formidable? How will you know when they are not?

Are you day trading? Or investing for the long haul?
Last edited by JoeRetire on Mon Sep 03, 2018 3:55 pm, edited 1 time in total.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by steve321 » Mon Sep 03, 2018 3:54 pm

arcticpineapplecorp. wrote:
Mon Sep 03, 2018 3:51 pm

The people you're buying the shares from therefore think the stock price will go down in the future, while you think it will go up. Only one will be right.
yeah but doesn't the same idea apply to indexing? You also buy individual shares when you index, so someone must be selling them.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by steve321 » Mon Sep 03, 2018 3:56 pm

arcticpineapplecorp. wrote:
Mon Sep 03, 2018 3:53 pm
steve321 wrote:
Mon Sep 03, 2018 3:45 pm
The total for the 2 stocks (2 millions) would be 30% of our liquid worth though well below 20% of our worth if we consider our rental properties.
Yes you are right, of course it would have been much better to spot them earlier on when they were smaller. I was solely interested in real estate though at the time; so I missed out.
Now you're saying those two stocks would be 30% of your net worth, but the previous post you said it would be less. What's going on here?
In the previous post I referred to each stock (1M£), then I realised that your question was for the total (2 stocks, 2M£) so 30% refers to that (15% referred to each stock in the previous post).
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by youdiditr2 » Mon Sep 03, 2018 3:59 pm

steve321 wrote:
Mon Sep 03, 2018 2:31 pm
I am currently indexing but I am having more and more doubts about my strategy. I have voiced some of my doubts in my thread on Mr West. I am now contemplating the possibility of putting a big chunck of money in Amazon and Alphabet (say 1M£ in each). Here's the reason
1. Alphabet has been compared to a tech stock ETF, because they invest in many small tech companies (besides Google). So it's quite diversified.
2. I've had some experience with Amazon as a customer and I realised that unlike other companies, that are interested in making a quick buck, Amazon is building for the long term future. They want to please you as a customer like nobody else does, it doesn't matter if they lose money through refunding you (no questions asked). This long term mentality is hugely impressive, I think they are set to conquer the world.
So what can go wrong with this? What's the Bogleheads' reason for avoiding such investment style? Alphabet in particular is quite diversified; and Amazon is a formidable business.
GE

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by sambb » Mon Sep 03, 2018 3:59 pm

what baout VITAX - tech index?

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by TimeRunner » Mon Sep 03, 2018 3:59 pm

Amazon and Alphabet. One of these is better than the other, so why invest in both? Just pick the best one! :P
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by prudent » Mon Sep 03, 2018 4:09 pm

steve321 wrote:
Mon Sep 03, 2018 3:39 pm
prudent, I have a question on the risks you mentioned in you previous post; basically if it's so risky why are people who have gotten very rich, like Bezos, and don't need to get richer but should be more interested in capital preservation - why are they concentrated in a single stock instead of indexing?
What's the specific risk? Could Amazon go to zero?!
He sold $1.1 billion of Amazon last year. He sold another billion worth the year before. At the time he sold a billion dollars worth last year, he still had $90 billion of stock. His financial security is not based on Amazon stock no matter what it does. He's still a multi-billionaire if it goes to zero (extreme case).

For most people here that kind of loss would be catastrophic. That's why they spread out the risk over many stocks and are willing to let the market do its thing over the long term. You can see why it's OK for Bezos to be as concentrated as he is, but not the average investor. There's too much risk.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by steve321 » Mon Sep 03, 2018 4:13 pm

prudent wrote:
Mon Sep 03, 2018 4:09 pm
steve321 wrote:
Mon Sep 03, 2018 3:39 pm
prudent, I have a question on the risks you mentioned in you previous post; basically if it's so risky why are people who have gotten very rich, like Bezos, and don't need to get richer but should be more interested in capital preservation - why are they concentrated in a single stock instead of indexing?
What's the specific risk? Could Amazon go to zero?!
He sold $1.1 billion of Amazon last year. He sold another billion worth the year before.
yes but I thought he sold it to fund Blue Origin, not because he thought the stock was too risky. But yeah I see what you mean.
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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by TD2626 » Mon Sep 03, 2018 4:14 pm

steve321 wrote:
Mon Sep 03, 2018 3:39 pm
prudent wrote:
Mon Sep 03, 2018 3:34 pm
steve321, do you have any more specific questions on this topic? It looks like things are getting repetitive, and all sides of the issue have been discussed.
prudent, I have a question on the risks you mentioned in you previous post; basically if it's so risky why are people who have gotten very rich, like Bezos, and don't need to get richer but should be more interested in capital preservation - why are they concentrated in a single stock instead of indexing?
What's the specific risk? Could Amazon go to zero?!
Yes - any specific single company could go to zero - it happens all the time. Being well diversified by owning dozens, hundreds, or even thousands of stocks (e.g. through mutual funds) mitigates this risk. Concentrating in a small number of individual stocks is very risky and imprudent for the average investor.

Very wealthy individuals with plenty of fame do not have to worry about losing everything, going broke, and not having money for food. Also, Bezos probably cares about the voting power that those shares provide in shareholder elections a lot more a small investor would.

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Re: What's wrong with putting most of my money into two stocks: Alphabet and Amazon?

Post by Broken Man 1999 » Mon Sep 03, 2018 4:18 pm

The stock market will be open tomorrow, so go big or go home! Give us an update when you pull the trigger.

Don't be swayed by these negative posters, take your chances.

At the very least you will have a great story to tell one day!

It might be "How I won millions with my stock picks." :) :moneybag :moneybag

Or, it might be "How I lost millions with my stock picks." :confused :moneybag :moneybag

Still, it will be a great tale, no matter what. And, either story will entertain the rest of us.

Broken Man 1999
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