Single stocks... would you?

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stocknoob4111
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Single stocks... would you?

Post by stocknoob4111 » Mon Feb 17, 2020 3:03 am

Was chatting with a friend today and got into somewhat of an argument about the risks of buying single stocks. My viewpoint is that it represents maximum risk since a stock could drop or even go into a death spiral and never recover.

His argument was that buying solid names like Apple, Amazon, Boeing etc. when they go down is an extremely low risk way to make money. He says he recently doubled his money with AAPL when he bought it in Dec '18 at the lows.

What is the Bogleheads view on strategically buying big caps when they crash? Are the risks truly low? Is it far fetched to think that Amazon, Microsoft or Apple will ever go bankrupt or even go into a situation where they will not recover to their highs?

lifeisinmirrors
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Re: Single stocks... would you?

Post by lifeisinmirrors » Mon Feb 17, 2020 3:15 am

Any company could perform poorly. Microsoft is probably the safest of the three, judging by its AAA cresit earing.

lakpr
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Re: Single stocks... would you?

Post by lakpr » Mon Feb 17, 2020 3:20 am

Any number of examples. GE, Sears, AT&T, ...
All these companies were really super giants in their time and comparable to Apple and Microsoft today. I would never buy single stocks ever. Additionally, I work in finance field, so cannot buy individual stock shares without prior permission from Compliance division, which does act as a deterrent

Momus
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Re: Single stocks... would you?

Post by Momus » Mon Feb 17, 2020 3:28 am

S&P 500 Index gives you 500 largest companies already. Survivorship bias. The number of stocks who do no make it to the index is enormous. If you just buy the index, you are buying winning stocks. If they suck, they fall off the index.

But if you wanna get rich quick, dump it all to SPCE and MSFT Calls and hope for the best :twisted:

22twain
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Re: Single stocks... would you?

Post by 22twain » Mon Feb 17, 2020 3:33 am

I already have about $20K of Apple stock, $18K of Microsoft, $14K each of Amazon and Alphabet, $9K of Facebook, etc... all in the CREF Stock account (fund) in my 403(b) that contains most of my stock allocation. That's enough for me. And I was buying them every month while I was still working, via payroll deduction.
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Wiggums
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Re: Single stocks... would you?

Post by Wiggums » Mon Feb 17, 2020 4:46 am

stocknoob4111 wrote:
Mon Feb 17, 2020 3:03 am
Was chatting with a friend today and got into somewhat of an argument about the risks of buying single stocks. My viewpoint is that it represents maximum risk since a stock could drop or even go into a death spiral and never recover.

His argument was that buying solid names like Apple, Amazon, Boeing etc. when they go down is an extremely low risk way to make money. He says he recently doubled his money with AAPL when he bought it in Dec '18 at the lows.

What is the Bogleheads view on strategically buying big caps when they crash? Are the risks truly low? Is it far fetched to think that Amazon, Microsoft or Apple will ever go bankrupt or even go into a situation where they will not recover to their highs?
11 year bull market. Hard not to make money. Don’t you think?

M.Lee
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Re: Single stocks... would you?

Post by M.Lee » Mon Feb 17, 2020 5:29 am

stocknoob4111 wrote:
Mon Feb 17, 2020 3:03 am
Was chatting with a friend today and got into somewhat of an argument about the risks of buying single stocks. My viewpoint is that it represents maximum risk since a stock could drop or even go into a death spiral and never recover.
Maximum risk, but maximum reward.
His argument was that buying solid names like Apple, Amazon, Boeing etc. when they go down is an extremely low risk way to make money. He says he recently doubled his money with AAPL when he bought it in Dec '18 at the lows.
I'm a swing trader, so my thinking is like your friend's.
What is the Bogleheads view on strategically buying big caps when they crash? Are the risks truly low? Is it far fetched to think that Amazon, Microsoft or Apple will ever go bankrupt or even go into a situation where they will not recover to their highs?
From the brief time I've been on this site, my observation is that most adovocate Vanguard funds. I have noticed many that are not active traders. Therefore, you might get a biased opinion on that.

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Re: Single stocks... would you?

Post by z3r0c00l » Mon Feb 17, 2020 6:31 am

Like buying Enron in April 2001, buy only the biggest companies on the dips.

CycloRista
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Re: Single stocks... would you?

Post by CycloRista » Mon Feb 17, 2020 6:39 am

It depends on the stage of life where you are (just starting out on up to nearing retirement), how comfortable you are with making your own investment decisions, how much time you have, level of patience, etc.

Yes, I buy single stocks in an individual trading account and have done so since it was possible to trade on the internet (via E*Trade on a dial-up CompuServe account). This is where I am ultra aggressive and tolerate far more risk than with my retirement funds and other investments. I have a lot of fun interacting with the financial folks who manage some of my investments. There is always something to learn from talking to others (not all of it is worthwhile haha).

I keep my trading account somewhere in the vicinity of 15-20% of my total holdings to minimize the overall negative impact on my entire portfolio should things go belly up. I waited when things went sideways in '87 (on Black Monday), during the recessions of 90-91, 2001, the Great Recession of 07-08 along with whatever occurred in December 2018 and December 2019. Many of my friends and colleagues made a number of changes or pulled out completely during one of more "bumps in the road" which cost them dearly.

Sure I've had a few dogs in my picks but the huge plusses have far outweighed the negatives. I am most familiar with tech stocks as it is my line of work though do my best to stay diversified for example some of what I've invested in recently: BYND, CAT, F, GNRC, NOW, OKTA, PYPL, SFIX, TEAM and WORK. There are a number of ways to get in to some extent with less granularity (QQQ as a tech stock investment, index funds of all sorts, ...) depending on your goal(s).

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4nursebee
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Re: Single stocks... would you?

Post by 4nursebee » Mon Feb 17, 2020 6:43 am

I am not really interested in big caps that crash.
Perhaps if there were a major market decline, credit crisis of some kind.
I missed ford at two, think it went to eighteen or so, serving as an anchor for me.

I’d rather buy growth company, new products, new services, strong mission and leadership, pricing at new highs.
Pale Blue Dot

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JoMoney
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Re: Single stocks... would you?

Post by JoMoney » Mon Feb 17, 2020 7:03 am

I wonder at what point of buying the dip in AIG would have been "low risk"
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Re: Single stocks... would you?

Post by Watty » Mon Feb 17, 2020 7:21 am

stocknoob4111 wrote:
Mon Feb 17, 2020 3:03 am
Was chatting with a friend today and got into somewhat of an argument about the risks of buying single stocks.
There may be some things that you need to "agree to disagree" on.
stocknoob4111 wrote:
Mon Feb 17, 2020 3:03 am
Is it far fetched to think that Amazon, Microsoft or Apple will ever go bankrupt or even go into a situation where they will not recover to their highs?
A better question is how many times a company like those with a trillion dollar market cap can double in size.

To get a 7.2% return a company would need to double in size in about 10 years if it did not pay any dividends.

I do not try to pick individual stocks but owning companies that are that large in my index funds makes me uneasy just because I don't know how they can keep growing and they don't pay a large dividend to make up for limited growth prospects.

M.Lee
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Re: Single stocks... would you?

Post by M.Lee » Mon Feb 17, 2020 7:31 am

Watty wrote:
Mon Feb 17, 2020 7:21 am
To get a 7.2% return a company would need to double in size in about 10 years if it did not pay any dividends.
I don't understand this comment at all. I've made 7% give or take several times during the last year. I did it on Walmart and Disney to name just two. Bought them right before their positive earnings came out and sold a couple days later. I smile to myself with the Enron, Sears, etc. examples. These are typical comments that the Financial Advisors make to support their thinking. It's almost like they've all been taught the same script.

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Re: Single stocks... would you?

Post by nisiprius » Mon Feb 17, 2020 7:33 am

"Listen, I work for Imbray and I know. You know what's behind these stocks? Well, I'll tell you. All, or nearly all, the public utilities of the Middle West and the brain of a man like Solomon Imbray. What more security would you want?"...

"Well, fellahs, old man Solomon Imbray has got a head on his shoulders. He's a smart man," Ike said.

"He ought to be. With all the dough he's made," Studs said.

"You're damn right he's smart. If you coast along with him, you're coasting along with a guy who's got a head on his shoulders. I work for one of the Imbray companies, and I'm getting fifty bucks a week. And you know what I'm doing? I'm sinking twenty of it in stock... I'm picking up almost a share and a half a week. And when it's a company backed by Solomon Imbray, it's safe."
The dialog is from a 1935 novel, Judgement Day, by James T. Farrell; "Imbray" is a lightly fictionalized version of Samuel Insull.

No company is too big to fail. The idea of the safe blue chips that will never let you down is cultivated by the big companies themselves. The speed with which a Fortune 500 company can collapse can be breathtaking. Enron proves that even outright fraud is possible, but even excluding Enrons the risk is there.

If the stock goes down, it's for a reason. Maybe a bad one, but there's a reason. The market could be overreacting, but you can't say "the market must be wrong because it's a big, famous company." The people willing to sell that company's stock to you know perfectly well that it's a big, famous company.

A reason why people ignore this is that when a giant company does fail, it loses its aura of blue-chippiness and becomes forgotten--it becomes some weird name out of the past that nobody knows any more. Nobody finds it shocking that the United States Leather Company was dropped from the Dow Jones Industrial Average in 1905. Nobody finds it shocking that Insull Utility Investments, Inc. is gone. Nobody finds it shocking that Wang Laboratories isn't running ads during the Superbowl. Even the decline of General Electric is starting to lose its shock value.

As the CEO of the Schwinn Bicycle Company (age test: ever heard of Schwinn?) said:
A young man in business is in danger of thinking that some day, when he has really mastered his job, everything will good smoothly. It is never going to happen. You had better know now that business means trouble. The two words are inseparable. From now on, you won't be out of trouble until you're out of business.
Businesses of all sizes lurch from crisis to crisis every few years, despite the bland public optimism the CEO expresses in the annual report every year.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

tibbitts
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Re: Single stocks... would you?

Post by tibbitts » Mon Feb 17, 2020 7:45 am

M.Lee wrote:
Mon Feb 17, 2020 7:31 am
Watty wrote:
Mon Feb 17, 2020 7:21 am
To get a 7.2% return a company would need to double in size in about 10 years if it did not pay any dividends.
I don't understand this comment at all. I've made 7% give or take several times during the last year. I did it on Walmart and Disney to name just two. Bought them right before their positive earnings came out and sold a couple days later. I smile to myself with the Enron, Sears, etc. examples. These are typical comments that the Financial Advisors make to support their thinking. It's almost like they've all been taught the same script.
It would be more interesting to hear how you did in 2000 and 2008.

I don't think you hear about Enron or Sears from financial advisors / brokers peddling individual securities at all - their stories will be similar to yours. Advisors peddling annuities or funds, maybe.

msk
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Re: Single stocks... would you?

Post by msk » Mon Feb 17, 2020 7:57 am

Almost everyone has dabbled in single stocks until they matured and went diversified. We almost always have to learn the hard way. Nevertheless, doubling an investment in AAPL or whatever is not worth much if all you had put into it was just a few percent of your Net Worth. Did you have the nerve to put in, say, 30% of your NW? You wish to dabble in individual picks? Learn to use Options. You can strictly limit your downside but actually impact your NW (if you have been right!). IMHO Options is the way to dabble in individual picks. I've since matured even beyond that and retired totally into 100% stocks worldwide by market weight. Took me 4 decades dabbling to get here... Now I plan to use Options when the market tanks >30%. Individual stocks generate too much anxiety at my age, but for youngsters, please go right ahead and play. After all, you will become the jaded BHs of tomorrow :greedy

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Re: Single stocks... would you?

Post by Jack FFR1846 » Mon Feb 17, 2020 8:14 am

Apple already did nearly go bankrupt once. Look at their history. They're lucky to still exist.

Polaroid was revolutionary with instant camera and film technology. Every DMV and passport office in the country had their equipment. Every scientist and engineer who needed scope photos used their cameras and film in the labs. Innovations kept coming to make picture taking easier. Great company. They went bankrupt.

Of the FAANG companies, if you were to fast forward 25 years from now, I doubt any of them will still exist.
Bogle: Smart Beta is stupid

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meowcat
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Re: Single stocks... would you?

Post by meowcat » Mon Feb 17, 2020 8:16 am

Congratulations are in order, your friend rolled the dice and got lucky, nothing more. Rest assured, he gambled when he bought AAPL.
More people should learn to tell their dollars where to go instead of asking them where they went. | -Roger Babson

M.Lee
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Re: Single stocks... would you?

Post by M.Lee » Mon Feb 17, 2020 8:33 am

Jack FFR1846 wrote:
Mon Feb 17, 2020 8:14 am
Of the FAANG companies, if you were to fast forward 25 years from now, I doubt any of them will still exist.
Maybe, but at present every single growth Mutual Fund has them all at the top percentages.

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Re: Single stocks... would you?

Post by nisiprius » Mon Feb 17, 2020 8:35 am

Jack FFR1846 wrote:
Mon Feb 17, 2020 8:14 am
Apple already did nearly go bankrupt once. Look at their history. They're lucky to still exist.
Indeed. I think it was more like twice. Apple was in terrible shape in 1985 as well as about 1996. The Macintosh, with only 128K of RAM, hinted at possibilities but failed to realize them.

I was personally at the Apple Worldwide Developers' Conference in 1996. I didn't go every year, but my company sent me because we all thought it was very important to get up to speed on the revolutionary new Mac OS, "Copland," as well as Quickdraw GX. There would be a compatibility testing lab in which we could see if our application worked with Copland, and we would all go home with a CD containing a developer release.

What a depressing event.

In the compatibility lab they had problems even getting Copland to boot, and basically nobody's software ran under it.

Gil Amelio came out in front of an audience of developers in casual dress... many in tee-shirts from previous WWDC's... in a suit and tie. To shouts of "lose the tie! lose the tie!" he looked puzzled and paralyzed and didn't do it. He stumbled woodenly through some unconvincing speech. Guy Kawasaki and Heidi Roizen tried to work up enthusiasm and convince developers that Apple "finally has adult supervision." At some point they apologized that the developer releases were not ready but would be mailed out in a few weeks after the event. Then a few weeks later they announced that Copland was cancelled.
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Re: Single stocks... would you?

Post by jabberwockOG » Mon Feb 17, 2020 8:37 am

In a long running bull markets more and more people start thinking the can successfully evaluate and pick winning single stock investments. I have been guilty of that in the past and at some point then I was convinced it was not that difficult to pick winners.

It took the sharp market downturns of 2000 and 2008 to teach me that my "exceptionalism" is in areas other than consistently picking winning individual stocks. It was an expensive lesson.
Last edited by jabberwockOG on Mon Feb 17, 2020 8:38 am, edited 2 times in total.

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arcticpineapplecorp.
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Re: Single stocks... would you?

Post by arcticpineapplecorp. » Mon Feb 17, 2020 8:37 am

M.Lee wrote:
Mon Feb 17, 2020 7:31 am
Watty wrote:
Mon Feb 17, 2020 7:21 am
To get a 7.2% return a company would need to double in size in about 10 years if it did not pay any dividends.
I don't understand this comment at all. I've made 7% give or take several times during the last year. I did it on Walmart and Disney to name just two. Bought them right before their positive earnings came out and sold a couple days later. I smile to myself with the Enron, Sears, etc. examples. These are typical comments that the Financial Advisors make to support their thinking. It's almost like they've all been taught the same script.
so you like paying the higher short term capital gains rate tax?
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

M.Lee
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Re: Single stocks... would you?

Post by M.Lee » Mon Feb 17, 2020 8:39 am

arcticpineapplecorp. wrote:
Mon Feb 17, 2020 8:37 am
so you like paying the higher short term capital gains rate tax?
Money is in IRA.

M.Lee
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Re: Single stocks... would you?

Post by M.Lee » Mon Feb 17, 2020 8:43 am

msk wrote:
Mon Feb 17, 2020 7:57 am
Did you have the nerve to put in, say, 30% of your NW?
Below I copied from my Fidelity transaction one of my sales. Why did I sell Amzn, Apple, Google, Visa, FB, and a few others? Because I was gullible and listened to the nay sayers about how I should be more diversified.

YOU SOLD AMAZON.COM INC (AMZN) (Cash)Close Popup
Symbol AMZN
Description AMAZON.COM INC
Shares -179.000
Price 1,874.5678
Amount $335,535.74
Commission $4.95
Fees $6.95
Settlement Date 06/12/2019

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arcticpineapplecorp.
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Re: Single stocks... would you?

Post by arcticpineapplecorp. » Mon Feb 17, 2020 8:45 am

stocknoob4111 wrote:
Mon Feb 17, 2020 3:03 am
Was chatting with a friend today and got into somewhat of an argument about the risks of buying single stocks. My viewpoint is that it represents maximum risk since a stock could drop or even go into a death spiral and never recover.

His argument was that buying solid names like Apple, Amazon, Boeing etc. when they go down is an extremely low risk way to make money. He says he recently doubled his money with AAPL when he bought it in Dec '18 at the lows.

What is the Bogleheads view on strategically buying big caps when they crash? Are the risks truly low? Is it far fetched to think that Amazon, Microsoft or Apple will ever go bankrupt or even go into a situation where they will not recover to their highs?
what's the strategy exactly? what percentage exactly does the stock need to go down by in order to buy it? If you buy it then, and it goes down further, do you keep buying it? If the amount you determine the stock "needs" to go down by is 20% and it only goes down 19% and you don't buy it, will you have regrets if/when it goes back up?

William Bernstein wrote in The Four Pillars of Investing:
“...concentrating your portfolio in a few stocks maximizes your chances of getting rich. Unfortunately, it also maximizes your chance of becoming poor. Owning the whole market—indexing—minimizes your chances of both outcomes by guaranteeing you the market return.”
Read that. Read it again. Read it aloud. Are you feeling lucky? Is there something wrong with getting the generous return of the stock market in its entirety? Do you need more? Why? Do you believe in get rich quick schemes? Why?

80% of active fund managers can't seem to outperform the S&P500 (and most markets worldwise, regardless of the index, small cap, large cap, etc) in a given year. source: https://us.spindices.com/spiva/#/reports

Why will you be one of those in the 20th percentile to beat the market? The SPIVA stats show even the 20% who beat the market in one year can't continue beating the market long term. The longer they have at it, the worse their returns get and the surer they will underperform the market. Do you think you'll do better? Why?

I own Amazon, Microsoft and Apple...but I own them along with thousands of other companies. I don't believe in taking idiosyncratic risk.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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1789
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Re: Single stocks... would you?

Post by 1789 » Mon Feb 17, 2020 8:46 am

He thinks he knows because this is what he believes. It is very hard to change people’s beliefs.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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Re: Single stocks... would you?

Post by Flashes1 » Mon Feb 17, 2020 9:14 am

I read an article yesterday about Applied Materials (AMAT) being strategically positioned to power AI and 5G. I haven't owned an individual stock for +15 years but I'M SO TEMPTED TO DIP MY TOES ON THIS ONE!

BuyandHold37
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Re: Single stocks... would you?

Post by BuyandHold37 » Mon Feb 17, 2020 9:16 am

I can and I do.

The real question is, do you want (and have confidence in your ability) to manage your own portfolio (stocks) or do you want someone else to manage it for you (mutual funds).

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Re: Single stocks... would you?

Post by CyclingDuo » Mon Feb 17, 2020 9:47 am

stocknoob4111 wrote:
Mon Feb 17, 2020 3:03 am
Was chatting with a friend today and got into somewhat of an argument about the risks of buying single stocks. My viewpoint is that it represents maximum risk since a stock could drop or even go into a death spiral and never recover.

His argument was that buying solid names like Apple, Amazon, Boeing etc. when they go down is an extremely low risk way to make money. He says he recently doubled his money with AAPL when he bought it in Dec '18 at the lows.

What is the Bogleheads view on strategically buying big caps when they crash? Are the risks truly low? Is it far fetched to think that Amazon, Microsoft or Apple will ever go bankrupt or even go into a situation where they will not recover to their highs?
Buy 100 different individual stocks, and get back to us in 40 years. 8-)
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Re: Single stocks... would you?

Post by midareff » Mon Feb 17, 2020 9:54 am

stocknoob4111 wrote:
Mon Feb 17, 2020 3:03 am
Was chatting with a friend today and got into somewhat of an argument about the risks of buying single stocks. My viewpoint is that it represents maximum risk since a stock could drop or even go into a death spiral and never recover.

His argument was that buying solid names like Apple, Amazon, Boeing etc. when they go down is an extremely low risk way to make money. He says he recently doubled his money with AAPL when he bought it in Dec '18 at the lows.

What is the Bogleheads view on strategically buying big caps when they crash? Are the risks truly low? Is it far fetched to think that Amazon, Microsoft or Apple will ever go bankrupt or even go into a situation where they will not recover to their highs?
I have noticed that many gamblers only talk about the ones they won on, never the ones they lost on. Since you didn't mention you were chatting with him on his private island I'll assume he doesn't make much of a habit of it.

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Re: Single stocks... would you?

Post by KlangFool » Mon Feb 17, 2020 10:00 am

OP,

A stock doubling is not enough reason for me to gamble on that stock. It would take the possibility of 10X to 30X for me to gamble on a single stock. And, I would put 5K on that stock.

This is a simple calculation of Risk versus Reward.

A) At 2X, you would have to put a significant amount of your money into this stock to matter. For example, you put 10% of your portfolio into this stock.

1) If you win, you gain an additional 10% of your portfolio. It is 110% now.

2) If you lose, you lose 10%. It is 90% now.

It is a lousy bet. The gain is insignificant but the loss is significant. It is a lose-lose bet. Even if you win, it won't matter.


B) At 10X to 30X with 5K

1) If you win, it is 50K to 150K. Good money for a nice vacation.

2) If you lose, it is only 5K. It is less than 0.5% for me. It won't matter.

This is a good bet. The gain is significant but the loss is insignificant.

Please gamble correctly.

KlangFool

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Re: Single stocks... would you?

Post by Sandtrap » Mon Feb 17, 2020 10:06 am

These types of threads remind me:

1. How wealthy would I be if I bought FAANG stocks when they were a dollar? :confused
2. How wealthy would I be if I bought "Bitcoin" when it was a dollar for each coin (now $8000 plus? each.)? :confused

then. . . that leads to. . . .

1. Where would I be if I went to medical school instead of finance? :shock:
2. How would life have turned out if I'd have married "x" instead of "y"? :confused
3. . . . . . >?

You have to watch what rabbit/gopher hole you step in. . .

Actionably: I don't have the constitution to invest in anything that is volatile.
So, index funds are good enough.

j :happy
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Re: Single stocks... would you?

Post by GerryL » Mon Feb 17, 2020 10:20 am

stocknoob4111 wrote:
Mon Feb 17, 2020 3:03 am
Was chatting with a friend today and got into somewhat of an argument about the risks of buying single stocks. My viewpoint is that it represents maximum risk since a stock could drop or even go into a death spiral and never recover.

His argument was that buying solid names like Apple, Amazon, Boeing etc. when they go down is an extremely low risk way to make money. He says he recently doubled his money with AAPL when he bought it in Dec '18 at the lows.

What is the Bogleheads view on strategically buying big caps when they crash? Are the risks truly low? Is it far fetched to think that Amazon, Microsoft or Apple will ever go bankrupt or even go into a situation where they will not recover to their highs?
1) Your friend doesn't understand the relationship between risk and reward.

2) People who experience an impressive gain with a stock pick often mistake luck for skill and think they are smarter than they actually are.

3) I bought and held my company (large cap) stock (in an ESPP) and remember a time when it had split several times and got up to about $80. People with options packages would "call in rich" and disappear from the workforce. Then, after I'd been with the company around 7 years, it started to go down. And down and down. (And my concern that company stock accounted for too much of my portfolio was no longer a problem.) For years it bounced around near $20 and below. After around 20 years it has gradually made its way back up to around $60, for now. The risk is not so much losing everything in a bankruptcy but in the stock stagnating -- or going down AND stagnating. Will it pop back up? When? Soon?

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1789
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Re: Single stocks... would you?

Post by 1789 » Mon Feb 17, 2020 10:44 am

KlangFool wrote:
Mon Feb 17, 2020 10:00 am
OP,

A stock doubling is not enough reason for me to gamble on that stock. It would take the possibility of 10X to 30X for me to gamble on a single stock. And, I would put 5K on that stock.

This is a simple calculation of Risk versus Reward.

A) At 2X, you would have to put a significant amount of your money into this stock to matter. For example, you put 10% of your portfolio into this stock.

1) If you win, you gain an additional 10% of your portfolio. It is 110% now.

2) If you lose, you lose 10%. It is 90% now.

It is a lousy bet. The gain is insignificant but the loss is significant. It is a lose-lose bet. Even if you win, it won't matter.


B) At 10X to 30X with 5K

1) If you win, it is 50K to 150K. Good money for a nice vacation.

2) If you lose, it is only 5K. It is less than 0.5% for me. It won't matter.

This is a good bet. The gain is significant but the loss is insignificant.

Please gamble correctly.

KlangFool
Good post KlangFool
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

BuyandHold37
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Re: Single stocks... would you?

Post by BuyandHold37 » Mon Feb 17, 2020 10:47 am

Jack FFR1846 wrote:
Mon Feb 17, 2020 8:14 am
Of the FAANG companies, if you were to fast forward 25 years from now, I doubt any of them will still exist.
This is a great illustration: https://www.youtube.com/watch?v=8WVoJ6JNLO8

dukeblue219
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Re: Single stocks... would you?

Post by dukeblue219 » Mon Feb 17, 2020 10:50 am

General Electric is probably the poster child for this. They were as blue chip as blue chip can be. Look at the chart over the last 20 years. You could make money on the ups and downs but timing would be critical.

A LOT of people bought GE for pennies on the dollar in 02 and 08 (ish). Hasn't been a phenomenal return for most of them...
Last edited by dukeblue219 on Mon Feb 17, 2020 10:50 am, edited 1 time in total.

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1789
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Re: Single stocks... would you?

Post by 1789 » Mon Feb 17, 2020 10:50 am

BuyandHold37 wrote:
Mon Feb 17, 2020 10:47 am
Jack FFR1846 wrote:
Mon Feb 17, 2020 8:14 am
Of the FAANG companies, if you were to fast forward 25 years from now, I doubt any of them will still exist.
This is a great illustration: https://www.youtube.com/watch?v=8WVoJ6JNLO8
I think 25 years is too long. Maybe in 10 years they would be gone from top 10?
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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Re: Single stocks... would you?

Post by Gemini1962 » Mon Feb 17, 2020 10:52 am

CyclingDuo wrote:
Mon Feb 17, 2020 9:47 am
Buy 100 different individual stocks, and get back to us in 40 years. 8-)
Well I don't know about the rest of you but that's a bit ambitious on my part :(

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Re: Single stocks... would you?

Post by KlangFool » Mon Feb 17, 2020 10:52 am

Folks,

Before anyone convinces you of any to get rich quick scheme, ask yourself how does it compare to the boring 60/40 AA.

https://personal.vanguard.com/us/insigh ... llocations

The average annual return is 8.6%. The worst-case loss is -26.6%. The best case is 36.7%. It will double in about 8 to 9 years on average.

The single stock's risk would be significantly higher than the 60/40. How does it make any sense if it only doubles?

The average return = no idea. The worst-case loss = 100%. The best case is 100% over ?? years?

KlangFool

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Re: Single stocks... would you?

Post by mottooscillator » Mon Feb 17, 2020 11:03 am

msk wrote:
Mon Feb 17, 2020 7:57 am
Almost everyone has dabbled in single stocks until they matured and went diversified. We almost always have to learn the hard way. Nevertheless, doubling an investment in AAPL or whatever is not worth much if all you had put into it was just a few percent of your Net Worth. Did you have the nerve to put in, say, 30% of your NW? You wish to dabble in individual picks? Learn to use Options. You can strictly limit your downside but actually impact your NW (if you have been right!). IMHO Options is the way to dabble in individual picks. I've since matured even beyond that and retired totally into 100% stocks worldwide by market weight. Took me 4 decades dabbling to get here... Now I plan to use Options when the market tanks >30%. Individual stocks generate too much anxiety at my age, but for youngsters, please go right ahead and play. After all, you will become the jaded BHs of tomorrow :greedy
This post describes me to a t. I guess options are in my future.

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Re: Single stocks... would you?

Post by backofbeyond » Mon Feb 17, 2020 11:06 am

90% of my portfolio is allocated to major Index funds.

However 10% is what I consider to be play money, which I invest either in individual stocks or focused ETFs. As others have pointed out, major index funds are the tortoise of the investment world...slow and steady (compared to individual stocks). I've done really well in some stocks like Apple, Alibaba, PG&E and I've done really bad in others like Uber and Boeing. Most of the individual stocks amounts are less than $1000. Except Apple makes up about 2% and BABA makes up 5%. So when a stock loses 40%, I sell it and put the proceeds into an Total Market ETF. I do track how my play money does vs Total Market ETF and so far I'm ahead by about .05%. Not that much and it could be in the Red just as easy but it's a hobby of mine and I enjoy it.
The question isn't at what age I want to retire, it is at what income. - George Foreman

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Re: Single stocks... would you?

Post by JoeRetire » Mon Feb 17, 2020 11:12 am

stocknoob4111 wrote:
Mon Feb 17, 2020 3:03 am
His argument was that buying solid names like Apple, Amazon, Boeing etc. when they go down is an extremely low risk way to make money.
Your friend is confused.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.

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Re: Single stocks... would you?

Post by pkcrafter » Mon Feb 17, 2020 11:15 am

stocknoob4111 wrote:
Mon Feb 17, 2020 3:03 am
Was chatting with a friend today and got into somewhat of an argument about the risks of buying single stocks. My viewpoint is that it represents maximum risk since a stock could drop or even go into a death spiral and never recover.

His argument was that buying solid names like Apple, Amazon, Boeing etc. when they go down is an extremely low risk way to make money. He says he recently doubled his money with AAPL when he bought it in Dec '18 at the lows.

What is the Bogleheads view on strategically buying big caps when they crash? Are the risks truly low? Is it far fetched to think that Amazon, Microsoft or Apple will ever go bankrupt or even go into a situation where they will not recover to their highs?
The idea of buying individual stocks ultimately comes down to whether you want to follow Boglehead principles or not. John Bogle and even Warren Buffet recommended buying the stock market, not single stocks. According to Jack Bogle, successful investing boils down to a simple strategy: Buy and hold the stock market for the long term.

Bogle's four simple steps to successful investing...

https://www.barrons.com/articles/jack-b ... 1556894514

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: Single stocks... would you?

Post by Grt2bOutdoors » Mon Feb 17, 2020 11:31 am

stocknoob4111 wrote:
Mon Feb 17, 2020 3:03 am
Was chatting with a friend today and got into somewhat of an argument about the risks of buying single stocks. My viewpoint is that it represents maximum risk since a stock could drop or even go into a death spiral and never recover.

His argument was that buying solid names like Apple, Amazon, Boeing etc. when they go down is an extremely low risk way to make money. He says he recently doubled his money with AAPL when he bought it in Dec '18 at the lows.

What is the Bogleheads view on strategically buying big caps when they crash? Are the risks truly low? Is it far fetched to think that Amazon, Microsoft or Apple will ever go bankrupt or even go into a situation where they will not recover to their highs?
It's only a poor strategy IF you solely rely upon it as in put all of your eggs in the single stock, then it's no different than a lottery ticket where you depend upon 6 numbers to hit along with 10 million other players. However, owning an index diffuses the risk of you losing all of your money or being dependent on any one stock or 30 stocks to deliver sufficient returns that you will attain your goal.

Essentially, your friend is buying the "dip". Nothing wrong with buying the "dip" but he should know ALL of the facts before jumping in with both feet. Does he know for certain that the dip was not company specific but was a market over reaction to some "news"? I bought the dip in 2018 but it was in VTSAX and earned about 40% since then. A solid name like Boeing? You mean the same company who's plane is grounded, the same one that both airline pilots and passengers alike are loath to fly on?, the same plane that regulators both domestically and internationally have not permitted to fly? the same plane that Boeing's own test pilots sent e-mails around saying the program was run by a bunch of monkeys?, the same company who's CEO was grilled in public testimony regarding the shortcomings and subsequently resigned under board pressure? Oh! that solid name! right??

They said Eastman Kodak was a solid blue chip too! Where is it today? Oh, that's right? no need for film or even cameras when I can use my cell phone to take a picture and I can develop it myself with a computer at home!

Don't confuse outcome with strategy. If you want to buy individual stock, buy it but so long as you are cognizant that each individual stock is essentially a lottery ticket and just because you win the lottery once, does not mean you can win it again with the same level of magnitude be it percentage wise or dollar wise. The law of averages is against you. If your friend is really good, tell him to pick the next blue chip stock, the stock that is emerging and will become the next apple or microsoft and then place a bet on it and hold it through thick and thin. He talks about his winners, have him show you his losers - if he can't admit to any or show you the statements, then you should take his advice with a big grain of salt. Even the best stock pickers in the world have owned losers, many losers and they will admit it in private but not on CNBC or the WSJ or Barrons for obvious reasons. I own individual stocks myself, and I have had winners and losers, the winners have outnumbered the losers but on average I've done as well, using a value strategy.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Single stocks... would you?

Post by nisiprius » Mon Feb 17, 2020 11:32 am

You probably won't convince your friend, so don't try too hard. Concentrate on not letting your friend convince you.

All of us are plagued by selective memory. Furthermore, all of us are plagued by a tendency to pat ourselves on the back for gambles that paid off, but make excuses for those that didn't on the grounds that "it was a ten-sigma event" and "nobody could possibly have foreseen it," i.e. it should have paid off, so we can ignore the fact that it didn't.

True story. A woman came back from a weekend in Atlantic City and said she "had won." Honestly, I was not cross-examining or challenging her, but continuing to chat, it transpired that a) she had won on Saturday; b) she had lost on Sunday; c) she had lost more on Sunday than she had won on Saturday, but d) she felt that the loss on Sunday didn't really count, because it only happened because she didn't follow her system on Sunday. If she'd followed it, she'd have won on Sunday, too.
Last edited by nisiprius on Mon Feb 17, 2020 3:45 pm, edited 2 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Single stocks... would you?

Post by Grt2bOutdoors » Mon Feb 17, 2020 11:41 am

Flashes1 wrote:
Mon Feb 17, 2020 9:14 am
I read an article yesterday about Applied Materials (AMAT) being strategically positioned to power AI and 5G. I haven't owned an individual stock for +15 years but I'M SO TEMPTED TO DIP MY TOES ON THIS ONE!
That wasn't an article, that was someone's opinion. I read the same one. I owned AMAT for over 10 years, I put $1,000 in and got $4,000 out, it's since gone up about 150 percent from the $4K cashout. Not a bad return and maybe I let the next Apple go, I doubt it but it could happen. What ever happens I know I own a sliver of that stock in my indexes and I'm happy with that. Good Luck with your dipping!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Single stocks... would you?

Post by BuyandHold37 » Mon Feb 17, 2020 11:43 am

Like anything else, diversification is the key. For every BABA, BIDU, RNG, etc. in my portfolio, I will have two MMM, JNJ, SO, ABBV, ANTM, etc.

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Re: Single stocks... would you?

Post by Grt2bOutdoors » Mon Feb 17, 2020 11:47 am

M.Lee wrote:
Mon Feb 17, 2020 7:31 am
Watty wrote:
Mon Feb 17, 2020 7:21 am
To get a 7.2% return a company would need to double in size in about 10 years if it did not pay any dividends.
I don't understand this comment at all. I've made 7% give or take several times during the last year. I did it on Walmart and Disney to name just two. Bought them right before their positive earnings came out and sold a couple days later. I smile to myself with the Enron, Sears, etc. examples. These are typical comments that the Financial Advisors make to support their thinking. It's almost like they've all been taught the same script.
You aren't investing, you are speculating. What you describe above is nothing more than gambling, so long as you are comfortable with that go ahead. You smile to yourself as does the guy selling you your next bet when the it goes the wrong way for you. If you are making 7% give or take several times last year, then you aren't doing too well if that was your annual return, if you made more than 36% then maybe, but after accounting for all the effort you had to make in the selection and execution, one who indexed didn't have to do anything but just sit back and watch the account value grow the same percentage with no effort at all. Simplicity ~ it works! :D
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Single stocks... would you?

Post by nisiprius » Mon Feb 17, 2020 11:48 am

Grt2bOutdoors wrote:
Mon Feb 17, 2020 11:31 am
...They said Eastman Kodak was a solid blue chip too! Where is it today? Oh, that's right? no need for film or even cameras when I can use my cell phone to take a picture and I can develop it myself with a computer at home!...
It's even worse than that. Eastman Kodak was an important pioneer in the development of digital photography. It is not putting it too strongly to say they invented it. This is the 1975 prototype, and the 1989 Ecam, patented in 1991.

Image

Source: Kodak's First Digital Moment

An important question to ask yourself: would I, as an individual retail investor, ever have spotted the problem? In the glossy annual reports, did Kodak's chairman ever say "oh, by the way, we invented the future of photography, and our idea is to sit on it, sell film for a few more years, and die?" Would you have seen anything in the 1990s to make you see them as anything than a safe, solid blue-chip company?
Last edited by nisiprius on Mon Feb 17, 2020 12:41 pm, edited 4 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Single stocks... would you?

Post by TravelforFun » Mon Feb 17, 2020 11:52 am

M.Lee wrote:
Mon Feb 17, 2020 8:43 am
msk wrote:
Mon Feb 17, 2020 7:57 am
Did you have the nerve to put in, say, 30% of your NW?
Below I copied from my Fidelity transaction one of my sales. Why did I sell Amzn, Apple, Google, Visa, FB, and a few others? Because I was gullible and listened to the nay sayers about how I should be more diversified.

YOU SOLD AMAZON.COM INC (AMZN) (Cash)Close Popup
Symbol AMZN
Description AMAZON.COM INC
Shares -179.000
Price 1,874.5678
Amount $335,535.74
Commission $4.95
Fees $6.95
Settlement Date 06/12/2019
Don't look back and feel bad. There's no woulda, coulda, shoulda in investing. You just have to move forward and catch the next fish.

TravelforFun

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