Single stocks... would you?

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fwellimort
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Re: Single stocks... would you?

Post by fwellimort » Mon Feb 17, 2020 11:55 am

I'll just leave this note... that by year 2026, it is expected half the S&P500 be replaced.

Article from 2016
In 1965, the average tenure of companies on the S&P 500 was 33 years. By 1990, it was 20 years. It's forecast to shrink to 14 years by 2026.
About 50 percent of the S&P 500 will be replaced over the next 10 years, if Innosight's forecasted churn rate holds.
In the past seven years alone, many renowned companies have been jettisoned from the S&P list: Eastman Kodak, National Semiconductor, Sprint, US Steel, Dell, and the New York Times. New companies to the list include Facebook, PayPal, Level 3 Communications, Under Armour, Seagate Technology, and Netflix.

In tracking all the comings and goings to the S&P 500 for the last 50 years, the study shows that the duration companies spend on the list fluctuates in cycles mirroring the overall state of the economy and disruption from new technologies, including biotech breakthroughs, social media, and cloud computing.

But the overall trend is that average tenure on the list is sloping downward.

Frugalbear
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Re: Single stocks... would you?

Post by Frugalbear » Mon Feb 17, 2020 11:58 am

Yes, I do a bit. I enjoy it. Especially now that there are no trading fees with most brokerages.

However, my individual stocks only account for 10% of my portfolio.

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Taylor Larimore
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Re: Single stocks... would you?

Post by Taylor Larimore » Mon Feb 17, 2020 12:15 pm

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?
stocknoob:

Congratulations on reaching a thousand Boglehead posts!

Your friend does not understand that even the best company stocks are likely to underperform. Only 10 of the original Dow stocks are still in the index.

Use the link below to send to your friend who dabbles with individual stocks:

What Experts Say About Individual Stocks vs. Mutual Funds

Best wishes
Taylor
Jack Bogle's Words of Wisdom: "The big advantage to investors is the instant diversification that comes with funds, as opposed to buying individual stocks or bonds."
"Simplicity is the master key to financial success." -- Jack Bogle

vipertom1970
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Re: Single stocks... would you?

Post by vipertom1970 » Mon Feb 17, 2020 12:49 pm

I used to own over 35 individual stocks total close to 800k, I did well but it sucked the life out of me while holding a full time job. I sold everything in late 2019, only kept MSFT and got into 3 fund portfolio. I now have more time with family, more to enjoy life and will never go back to individual stocks again.

atdharris
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Re: Single stocks... would you?

Post by atdharris » Mon Feb 17, 2020 1:01 pm

You can own individual stocks, but you need to constantly monitor them or you risk losing everything. I own the big ones Apple, Microsoft, Amazon, FB, Visa and Berkshire, but I know they are hardly set it and forget it investments. The large majority of what I have is in index funds though.

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

Post by arcticpineapplecorp. » Mon Feb 17, 2020 1:04 pm

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.

Please gamble correctly.

KlangFool
the question is which stocks will be 10X-30X?

If it were that simple to know, then wouldn't everyone just gamble on those stocks?

Since it's impossible to know, one would only be gambling.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

KlangFool
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Re: Single stocks... would you?

Post by KlangFool » Mon Feb 17, 2020 1:17 pm

arcticpineapplecorp. wrote:
Mon Feb 17, 2020 1:04 pm
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.

Please gamble correctly.

KlangFool
the question is which stocks will be 10X-30X?

If it were that simple to know, then wouldn't everyone just gamble on those stocks?

Since it's impossible to know, one would only be gambling.
That is not a problem. I know that I am gambling. I know that I can lose it all. So, I make sure that it is worth my effort to gamble.

The problem here is some people do not think that they are gambling when they buy a stock.

KlangFool

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stocknoob4111
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Re: Single stocks... would you?

Post by stocknoob4111 » Mon Feb 17, 2020 1:26 pm

KlangFool wrote:
Mon Feb 17, 2020 1:17 pm

The problem here is some people do not think that they are gambling when they buy a stock.

KlangFool
that is the thing.. my friend was of the opinion that it was a sure bet picking up these stocks at a discount and so far this strategy has yielded great results, AAPL hit $140 in Dec 2018, now it's over 2X!!!

In his mind AAPL or GOOG are "not going anywhere anytime soon" and were totally safe! He did say that the strategy was when the stocks were beaten down due to some temporary situation, something like if they dipped due to the Coronavirus would represent a "tremendous opportunity"

KlangFool
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Re: Single stocks... would you?

Post by KlangFool » Mon Feb 17, 2020 1:29 pm

stocknoob4111 wrote:
Mon Feb 17, 2020 1:26 pm
KlangFool wrote:
Mon Feb 17, 2020 1:17 pm

The problem here is some people do not think that they are gambling when they buy a stock.

KlangFool
that is the thing.. my friend was of the opinion that it was a sure bet picking up these stocks at a discount and so far this strategy has yielded great results, AAPL hit $140 in Dec 2018, now it's over 2X!!!

In his mind AAPL or GOOG are "not going anywhere anytime soon" and were totally safe! He did say that the strategy was when the stocks were beaten down due to some temporary situation, something like if they dipped due to the Coronavirus would represent a "tremendous opportunity"
You cannot save some people from themselves. How easy is it for a trillion-dollar company to double again?

KlangFool

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Watty
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Re: Single stocks... would you?

Post by Watty » Mon Feb 17, 2020 1:33 pm

Threads like this, and all the "100% stocks" threads almost make be want to take out a big short position on stocks.

Almost.

The thing that is holding me back is that I can truthfully say that I also saw the dot com bubble and the 2008 real estate bubble/financial crisis at least in general terms while they were going on.

The problem was that I saw them a couple of years before the markets peaked so if I had acted on it I would have been way too early.

langlands
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Re: Single stocks... would you?

Post by langlands » Mon Feb 17, 2020 2:49 pm

Yes I buy individual stocks to outperform the market. I plan to hold very long term. I agree with your friend that large negative news shocks are often a good buying opportunity (This is not necessarily market inefficiency. Rather, you are being paid a premium for taking risk others are not willing to stomach.) I disagree that it is a sure thing or that FAANG cannot go under.

Individual stocks have idiosyncratic risk. Buying many of them together reduces this idiosyncratic risk leaving you with the market risk. This is what index funds do. To hold a single stock (without any other individual positions), you need a very strong conviction the stock will outperform to overcome the idiosyncratic risk. With more positions, the idiosyncratic risk of your portfolio is reduced and the conviction you need in any single pick is reduced. The trade-off of course is that if it is difficult to find one stock pick, it is that much more difficult to find multiple stock picks you think will outperform. If you look at Warren Buffet as an example, a sweet spot seems to be between 15-30 picks. Around that area, assuming you aren't picking insanely risky penny or biotech stocks, I would estimate the volatility drag (due to the idiosyncratic risk) vs. an index fund to be about 1-2% annually. This is the hurdle you need to overcome to have a higher CAGR than an index fund. It is not easy, but certainly not impossible.
Last edited by langlands on Mon Feb 17, 2020 2:59 pm, edited 1 time in total.

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Re: Single stocks... would you?

Post by abuss368 » Mon Feb 17, 2020 2:49 pm

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?
Jack Bogle has said that no investors should own individual stocks as the risk is too high. I think that is very good advice.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

Grt2bOutdoors
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Re: Single stocks... would you?

Post by Grt2bOutdoors » Mon Feb 17, 2020 8:42 pm

abuss368 wrote:
Mon Feb 17, 2020 2:49 pm
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?
Jack Bogle has said that no investors should own individual stocks as the risk is too high. I think that is very good advice.
Said the man who owned stock in T Rowe Price Group Inc. I admire Jack for all he has done to give the little guy a fair shake in the markets, but please stop quoting him when you fail to disclose everything he's said and in the proper context.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Rosencrantz1
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Re: Single stocks... would you?

Post by Rosencrantz1 » Mon Feb 17, 2020 9:10 pm

I used to own quite a few individual stocks. Since "discovering" the boglehead way, I've pared back.
Full Disclosure: I still own AAPL, NFLX and HE (Hawaiian Electric) - owned them for years. But, I've certainly owned my share of non-performers too.

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Re: Single stocks... would you?

Post by abuss368 » Mon Feb 17, 2020 9:19 pm

Grt2bOutdoors wrote:
Mon Feb 17, 2020 8:42 pm
abuss368 wrote:
Mon Feb 17, 2020 2:49 pm
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?
Jack Bogle has said that no investors should own individual stocks as the risk is too high. I think that is very good advice.
Said the man who owned stock in T Rowe Price Group Inc. I admire Jack for all he has done to give the little guy a fair shake in the markets, but please stop quoting him when you fail to disclose everything he's said and in the proper context.
Thanks and will absolutely continue to quote Jack Bogle on a forum that is dedicated to “Investing advice inspired by Jack Bogle.”

I forgot the T Rowe Price piece. If I recall that was because Mr. Bogle wanted to keep an eye on his competitor. Either way irrelevant as his advice will serve investors well.

Best.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

rockstar
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Re: Single stocks... would you?

Post by rockstar » Mon Feb 17, 2020 9:22 pm

I own: AXP, UNH, BRK, and BX. I’ve own AXP since 2003. It was a buy and forget it position. Back then I was mostly all in bonds and preferreds. It pretty much tracked the market. I’ve own UNH since last year, I’ve own BRK for years as a value play. And I’ve owned BX for a while now. I have no reason to sell any of these positions. I might have second thoughts about BRK if Warren dies. But otherwise I feel good in these positions.

Nothing wrong with single stocks as long as you have a buy and sell plan.

The rest of my equity position is mostly VOO and QQQ.

MathIsMyWayr
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Re: Single stocks... would you?

Post by MathIsMyWayr » Mon Feb 17, 2020 9:28 pm

TravelforFun wrote:
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
There are not many things in life like a big bet paying off big. In one way or other, it will end some day.

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JonnyDVM
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Re: Single stocks... would you?

Post by JonnyDVM » Mon Feb 17, 2020 9:41 pm

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

Woah woah woah buddy. No boglehead would tell you to pay a $6.95 fee on a trade. You must have gotten that advice elsewhere.
I’d trade it all for a little more | -C Montgomery Burns

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

Post by arcticpineapplecorp. » Mon Feb 17, 2020 9:53 pm

KlangFool wrote:
Mon Feb 17, 2020 1:17 pm
arcticpineapplecorp. wrote:
Mon Feb 17, 2020 1:04 pm
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.

Please gamble correctly.

KlangFool
the question is which stocks will be 10X-30X?

If it were that simple to know, then wouldn't everyone just gamble on those stocks?

Since it's impossible to know, one would only be gambling.
That is not a problem. I know that I am gambling. I know that I can lose it all. So, I make sure that it is worth my effort to gamble.

The problem here is some people do not think that they are gambling when they buy a stock.

KlangFool
it's the "worth my effort" part that puzzles me. This statement presumes you know which stocks are worth the effort (because you know they'll go up 10X-30X, otherwise, you wouldn't bother with them by your own admission).

I ask you again, how can you (or anyone for that matter) possibly know which stocks will go up 10X-30X?

there is no way to know this, until after the fact.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

KlangFool
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Re: Single stocks... would you?

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

arcticpineapplecorp. wrote:
Mon Feb 17, 2020 9:53 pm
KlangFool wrote:
Mon Feb 17, 2020 1:17 pm
arcticpineapplecorp. wrote:
Mon Feb 17, 2020 1:04 pm
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.

Please gamble correctly.

KlangFool
the question is which stocks will be 10X-30X?

If it were that simple to know, then wouldn't everyone just gamble on those stocks?

Since it's impossible to know, one would only be gambling.
That is not a problem. I know that I am gambling. I know that I can lose it all. So, I make sure that it is worth my effort to gamble.

The problem here is some people do not think that they are gambling when they buy a stock.

KlangFool
it's the "worth my effort" part that puzzles me. This statement presumes you know which stocks are worth the effort (because you know they'll go up 10X-30X, otherwise, you wouldn't bother with them by your own admission).

I ask you again, how can you (or anyone for that matter) possibly know which stocks will go up 10X-30X?

there is no way to know this, until after the fact.
arcticpineapplecorp,

<<I ask you again, how can you (or anyone for that matter) possibly know which stocks will go up 10X-30X?>>

I won't know for sure. But, the possibility is there. Hence, it is a gamble. But, on the other hand, you could be pretty sure that Apple cannot go up to 10X to 30X.

KlangFool

CFOKevin
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Re: Single stocks... would you?

Post by CFOKevin » Mon Feb 17, 2020 10:24 pm

Older Boglehead here who still holds 5% of his portfolio in a couple of big winners. Costco (COST) bought in May, 1996 is up 31x while the market has grown 5x and Silicon Valley Bank (SVB) bought in October, 1998 is up 28x while the market has grown 3x.

My advice for individual stocks would be to invest only an amount you are willing to lose in a small number of stocks that you can monitor and have a solid investment thesis for. Let your winners run and sell losers relatively quickly. Limit total in individual names to no more than 10% of your NW and make sales or donate shares to stay within your bound.

Kevin

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CyclingDuo
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Re: Single stocks... would you?

Post by CyclingDuo » Mon Feb 17, 2020 11:04 pm

JonnyDVM wrote:
Mon Feb 17, 2020 9:41 pm
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

Woah woah woah buddy. No boglehead would tell you to pay a $6.95 fee on a trade. You must have gotten that advice elsewhere.
And JonnyDMV just won the Boglehead.org forums for the day!!!! :beer
"Everywhere is within walking distance if you have the time." ~ Steven Wright

Monsterflockster
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Re: Single stocks... would you?

Post by Monsterflockster » Tue Feb 18, 2020 12:09 am

lakpr wrote:
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
This. Sears was the “amazon” of its day.

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

Post by M.Lee » Tue Feb 18, 2020 7:00 am

JonnyDVM wrote:
Mon Feb 17, 2020 9:41 pm
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

Woah woah woah buddy. No boglehead would tell you to pay a $6.95 fee on a trade. You must have gotten that advice elsewhere.
Note that the transaction was June 2019. Trades are free now at Fidelity.

Caduceus
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Re: Single stocks... would you?

Post by Caduceus » Tue Feb 18, 2020 8:13 am

The vast majority of people who own individual stocks have no business buying them. I'm gonna make a bet that your friend has never even read Apple's financial statements. Buying something because it's a "safe," "blue-chip," "large-cap" stock or however he wants to describe it is not smart. People win lotteries all the time. Just because someone's made money off Tesla doesn't mean they're good investors - they're just lucky. Over long periods of time, their records are likely to be quite abysmal.

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El Greco
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Re: Single stocks... would you?

Post by El Greco » Tue Feb 18, 2020 4:26 pm

I did. I bought. I got conquered.

Now I invest in low cost, diversified managed and index funds.

For many years I was a stock picker. I had a lot of winners...and a lot of losers. About five years ago, I did an analysis of how well I had done with half my portfolio in mutual funds that I held for many years and the other half in stocks. The half in mutual funds, handily outperformed my stock-picking "genius". One of the major problems with holding individual stocks, is you never know when to sell them. You keep thinking, If I sell today I might miss out on major gains tomorrow. And I will feel foolish. Investing in diversified mutual funds and holding them removes that pressure from the equation. It is emotionless.

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Re: Single stocks... would you?

Post by abuss368 » Tue Feb 18, 2020 7:49 pm

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 would buy Total Stock and hope in the future it is double or triple in NAV!
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

traveler901
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Re: Single stocks... would you?

Post by traveler901 » Wed Feb 19, 2020 3:14 am

When I buy an individual stock it is to target mid or small cap companies. Can pay off big time but in the case of the loss need to be able to accept a loss and use it to tax loss harvest.

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abuss368
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Re: Single stocks... would you?

Post by abuss368 » Wed Feb 19, 2020 8:07 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 understand your challenge. I had a friend from college that put every penny he owned into Apple back in the 1990s. He thought I was crazy with index funds. When the early 2000s hit he reminded me of that.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

ryman554
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Re: Single stocks... would you?

Post by ryman554 » Wed Feb 19, 2020 9:18 am

BuyandHold37 wrote:
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).
With the rise of bigger and bigger data, where can we honestly hope to find any alpha anymore?

You buy single stocks because you believe they are mispriced. When there are literally armies of quants and computers with unlimited pocket books sitting milliseconds away from the stock exchange actively searching for such misprices, what information do we mere simple folk have privy to that the big guys miss?

I honestly want the single stock folks to give me a big hint without releasing their ip.

Wanderingwheelz
Posts: 352
Joined: Mon Mar 04, 2019 9:52 am

Re: Single stocks... would you?

Post by Wanderingwheelz » Wed Feb 19, 2020 10:00 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.
If you’re hearing the same thing over and over, from different
sources I feel like you owe it to yourself to begin to pay attention to what you’re being told.

If you’re not making AT LEAST an occasional 7% fast return on mega cap growth stocks in a market that returned @ 30%+ in the last year then I’d say you’re woefully inept.

The trick is not to ignore the stocks that DIDN’T give you the 7% that you highlighted. Because it’s very likely that there have been some. When you average all of it together over a 5 or 10 year timeframe you’ll find the same thing that professional stock pickers find- you lagged the averages.

atdharris
Posts: 431
Joined: Wed Jan 02, 2019 3:18 pm

Re: Single stocks... would you?

Post by atdharris » Wed Feb 19, 2020 11:26 am

Enron and the like were special circumstances. Accounting fraud is not the norm, at least I hope it isn't, and I won't look at that to decide what to buy.

As for places like Sears, it was obvious from anyone who had been to a Sears in the last decade that the company was falling apart. Sometimes investing can be as simple as viewing the product or experience for yourself and using your best judgment. I am not saying any of the big 4 will be around forever, but I don't expect us to wake up and find out that they are gone anytime soon.

That said, you always have to monitor individual stocks if you own them. That's why I would never own more than 6-8 at a time.

BuyandHold37
Posts: 74
Joined: Wed Apr 25, 2018 9:29 am

Re: Single stocks... would you?

Post by BuyandHold37 » Wed Feb 19, 2020 4:30 pm

So funny....Anyone investing in a mutual fund IS investing in single stocks, it's just that they are pooling their money with other people and are allowing the portfolio manager to choose the stocks.

Thesaints
Posts: 3455
Joined: Tue Jun 20, 2017 12:25 am

Re: Single stocks... would you?

Post by Thesaints » Wed Feb 19, 2020 4:33 pm

stocknoob4111 wrote:
Mon Feb 17, 2020 3:03 am
His argument was that buying solid names like ...Boeing
Gotta love it !

Mr.BB
Posts: 1223
Joined: Sun May 08, 2016 10:10 am

Re: Single stocks... would you?

Post by Mr.BB » Wed Feb 19, 2020 4:37 pm

nisiprius wrote:
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.
I believe Appl was 6 months away from bankruptcy when Steve Jobs came back.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

anoop
Posts: 1439
Joined: Tue Mar 04, 2014 1:33 am

Re: Single stocks... would you?

Post by anoop » Wed Feb 19, 2020 5:25 pm

Given the churn that happens does owning an S&P 500 index fund or ETF result in a capital loss each year? It sounds like they dump the losers and bring in perceived winners, so that should result in net capital loss most years even assuming no sale of fund or ETF shares themselves.

anoop
Posts: 1439
Joined: Tue Mar 04, 2014 1:33 am

Re: Single stocks... would you?

Post by anoop » Wed Feb 19, 2020 5:31 pm

stocknoob4111 wrote:
Mon Feb 17, 2020 3:03 am
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?
Not a boglehead view, since anything to do with individual stocks aside from creating your own true index fund with them is probably non-boglehead, but you have an opportunity to test that thesis now with GE. :)

Rosencrantz1
Posts: 561
Joined: Tue Sep 10, 2019 12:28 pm

Re: Single stocks... would you?

Post by Rosencrantz1 » Wed Feb 19, 2020 5:31 pm

ryman554 wrote:
Wed Feb 19, 2020 9:18 am
BuyandHold37 wrote:
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).
With the rise of bigger and bigger data, where can we honestly hope to find any alpha anymore?

You buy single stocks because you believe they are mispriced. When there are literally armies of quants and computers with unlimited pocket books sitting milliseconds away from the stock exchange actively searching for such misprices, what information do we mere simple folk have privy to that the big guys miss?

I honestly want the single stock folks to give me a big hint without releasing their ip.
I'm not sure that I agree with this - although, IF I were a day-trader (or short term trader of some type), I suppose this would hold. I still occasionally buy single stocks - BUT, the primary drivers for me to purchase are: I like and believe in the management, I like their business model, I like accelerating profits, I like their product line, etc etc. Having said this, I tend to hold all my equity purchases looooong term. I'm not nearly sophisticated enough as an investor to evaluate whether a stock is "mispriced" - especially in the very short term. You're right, though.... we (me) simple folk accept that I'm not privy to any special information that the big guys miss. :beer

anoop
Posts: 1439
Joined: Tue Mar 04, 2014 1:33 am

Re: Single stocks... would you?

Post by anoop » Wed Feb 19, 2020 5:41 pm

ryman554 wrote:
Wed Feb 19, 2020 9:18 am
I honestly want the single stock folks to give me a big hint without releasing their ip.
INTC is the only stock position in my portfolio. When I bought it, it had a PE < 12 (the S&P was much higher) and dividend > 3%, low debt, and I knew a lot of folks working there and they all said good things about it. I definitely would not buy it at this price.

MathWizard
Posts: 4173
Joined: Tue Jul 26, 2011 1:35 pm

Re: Single stocks... would you?

Post by MathWizard » Wed Feb 19, 2020 6:31 pm

Mr.BB wrote:
Wed Feb 19, 2020 4:37 pm
nisiprius wrote:
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.
I believe Appl was 6 months away from bankruptcy when Steve Jobs came back.
Yes, Jobs even said that.

Had the Just. Dept. not been after MicroSoft for anti-trust violations, and had Steve and Bill Gates collaborated in the past,
the Steve would not have been able to get Gates to make a cash infusion into Apple for 15% stake in the company.
Earlier, Gates would have either let his competitor fade away or acquired them for intellectual property rights.
By investing in Apple, Gates keeps a competitor alive and staves off monopoly complaints long enough for the Bush administration
to come in and make the suit against MicroSoft go away.

Pure genius of Jobs to make that call, and to endure the ire of the Apple fans. Boos were loud when Jobs introduced
Gates via video conference at a MacWorld event:

Code: Select all

https://www.youtube.com/watch?v=WxOp5mBY9IY

Caduceus
Posts: 2729
Joined: Mon Sep 17, 2012 1:47 am

Re: Single stocks... would you?

Post by Caduceus » Wed Feb 19, 2020 6:41 pm

ryman554 wrote:
Wed Feb 19, 2020 9:18 am

With the rise of bigger and bigger data, where can we honestly hope to find any alpha anymore?

You buy single stocks because you believe they are mispriced. When there are literally armies of quants and computers with unlimited pocket books sitting milliseconds away from the stock exchange actively searching for such misprices, what information do we mere simple folk have privy to that the big guys miss?
There are lots of reasons that the big guys miss all the time. One reason is that their compensation and incentives doom them to under-performance. Hedge funds are pressured into finding good ideas and the next big thing at a faster rate than is possible. Analysts don't get bonuses unless they perform, so there's a built-in incentive to always be doing something. They're not going to sit there waiting for a genuinely good opportunity before they commit to it. Their performance is measured by the quarter, by the year. So they are often looking for things that will do well soon, and that's a fool's errand and not much different from gambling.

Investing is not a science like physics. The types of correlations or factors that quants and computers use in their models have broken down consistently throughout recent history as paradigms change. And this will happen again, and again, and again, until Wall Street weans itself off its physics-envy and returns to traditional finance and valuation methods rooted in accounting. If you've ever studied the capital asset pricing model, you'd understand why folks like Buffett and Munger consider it so inane.

ryman554
Posts: 1300
Joined: Sun Jan 12, 2014 9:44 pm

Re: Single stocks... would you?

Post by ryman554 » Thu Feb 20, 2020 10:06 am

anoop wrote:
Wed Feb 19, 2020 5:41 pm
ryman554 wrote:
Wed Feb 19, 2020 9:18 am
I honestly want the single stock folks to give me a big hint without releasing their ip.
INTC is the only stock position in my portfolio. When I bought it, it had a PE < 12 (the S&P was much higher) and dividend > 3%, low debt, and I knew a lot of folks working there and they all said good things about it. I definitely would not buy it at this price.
By that rationale, shouldn't you be selling it today?

ryman554
Posts: 1300
Joined: Sun Jan 12, 2014 9:44 pm

Re: Single stocks... would you?

Post by ryman554 » Thu Feb 20, 2020 10:06 am

Caduceus wrote:
Wed Feb 19, 2020 6:41 pm
ryman554 wrote:
Wed Feb 19, 2020 9:18 am

With the rise of bigger and bigger data, where can we honestly hope to find any alpha anymore?

You buy single stocks because you believe they are mispriced. When there are literally armies of quants and computers with unlimited pocket books sitting milliseconds away from the stock exchange actively searching for such misprices, what information do we mere simple folk have privy to that the big guys miss?
There are lots of reasons that the big guys miss all the time. One reason is that their compensation and incentives doom them to under-performance. Hedge funds are pressured into finding good ideas and the next big thing at a faster rate than is possible. Analysts don't get bonuses unless they perform, so there's a built-in incentive to always be doing something. They're not going to sit there waiting for a genuinely good opportunity before they commit to it. Their performance is measured by the quarter, by the year. So they are often looking for things that will do well soon, and that's a fool's errand and not much different from gambling.

Investing is not a science like physics. The types of correlations or factors that quants and computers use in their models have broken down consistently throughout recent history as paradigms change. And this will happen again, and again, and again, until Wall Street weans itself off its physics-envy and returns to traditional finance and valuation methods rooted in accounting. If you've ever studied the capital asset pricing model, you'd understand why folks like Buffett and Munger consider it so inane.
Interesting, thanks!

anoop
Posts: 1439
Joined: Tue Mar 04, 2014 1:33 am

Re: Single stocks... would you?

Post by anoop » Thu Feb 20, 2020 10:12 am

ryman554 wrote:
Thu Feb 20, 2020 10:06 am
anoop wrote:
Wed Feb 19, 2020 5:41 pm
ryman554 wrote:
Wed Feb 19, 2020 9:18 am
I honestly want the single stock folks to give me a big hint without releasing their ip.
INTC is the only stock position in my portfolio. When I bought it, it had a PE < 12 (the S&P was much higher) and dividend > 3%, low debt, and I knew a lot of folks working there and they all said good things about it. I definitely would not buy it at this price.
By that rationale, shouldn't you be selling it today?
Why? I am still getting the equivalent of 5% dividend on my cost basis.

ryman554
Posts: 1300
Joined: Sun Jan 12, 2014 9:44 pm

Re: Single stocks... would you?

Post by ryman554 » Thu Feb 20, 2020 10:23 am

anoop wrote:
Thu Feb 20, 2020 10:12 am
ryman554 wrote:
Thu Feb 20, 2020 10:06 am
anoop wrote:
Wed Feb 19, 2020 5:41 pm
ryman554 wrote:
Wed Feb 19, 2020 9:18 am
I honestly want the single stock folks to give me a big hint without releasing their ip.
INTC is the only stock position in my portfolio. When I bought it, it had a PE < 12 (the S&P was much higher) and dividend > 3%, low debt, and I knew a lot of folks working there and they all said good things about it. I definitely would not buy it at this price.
By that rationale, shouldn't you be selling it today?
Why? I am still getting the equivalent of 5% dividend on my cost basis.
Because you wouldn't buy it today. Holding a stock is, in all respects (modulo taxes), a decision to buy each and every day. If you wouldn't buy it today, then you shouldn't hold it, either. Using 5% dividend on cost basis is 5% on what it was worth yesterday, not on what it is today, very similar to the sunken cost fallacy. It doesn't matter what you paid for it, it has a value today that you can exercise and choose to put it toward a more lucrative investment. thus the effective yeild is not 5%, it's what the dividend rate/current price is. If it's not good value, be like Buffet and sell it and move on to something that is -- you'll make more money in the long run, as long as you can pick your stocks well.

anoop
Posts: 1439
Joined: Tue Mar 04, 2014 1:33 am

Re: Single stocks... would you?

Post by anoop » Thu Feb 20, 2020 11:05 am

ryman554 wrote:
Thu Feb 20, 2020 10:23 am
anoop wrote:
Thu Feb 20, 2020 10:12 am
ryman554 wrote:
Thu Feb 20, 2020 10:06 am
anoop wrote:
Wed Feb 19, 2020 5:41 pm
ryman554 wrote:
Wed Feb 19, 2020 9:18 am
I honestly want the single stock folks to give me a big hint without releasing their ip.
INTC is the only stock position in my portfolio. When I bought it, it had a PE < 12 (the S&P was much higher) and dividend > 3%, low debt, and I knew a lot of folks working there and they all said good things about it. I definitely would not buy it at this price.
By that rationale, shouldn't you be selling it today?
Why? I am still getting the equivalent of 5% dividend on my cost basis.
Because you wouldn't buy it today. Holding a stock is, in all respects (modulo taxes), a decision to buy each and every day. If you wouldn't buy it today, then you shouldn't hold it, either. Using 5% dividend on cost basis is 5% on what it was worth yesterday, not on what it is today, very similar to the sunken cost fallacy. It doesn't matter what you paid for it, it has a value today that you can exercise and choose to put it toward a more lucrative investment. thus the effective yeild is not 5%, it's what the dividend rate/current price is. If it's not good value, be like Buffet and sell it and move on to something that is -- you'll make more money in the long run, as long as you can pick your stocks well.
That’s an interesting thought. Will have to think about it. For now I’m comfortable with my position.

deikel
Posts: 1069
Joined: Sat Jan 25, 2014 7:13 pm

Re: Single stocks... would you?

Post by deikel » Thu Feb 20, 2020 12:35 pm

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?
All of these companies will eventually decline - that's almost baked into the core of capitalism.

The question is when and how or if they can morph into something new and wanted in the future (like Nokia going from rubber boots to cell phones to obscurity). These three will most likely not loose value over night in a death spiral (or at least I can not see a singular fault that would cost them so much money that an immediate decline is inevitable), but all three have problems that can become costly (Apple having no true new product, Microsoft suffering W10 with no end in sight, Amazon becoming so unwieldy that some form of restructuring becoming likely and so on). In fact, of those three, I would say Amazon has a better outlook then the others.

If you buy index funds like the S+P500 you actually do hold those stocks as well - in my mind even too much of them to truly represent the entire market, but that is just a function of their outsize market weight.

In general, anecdotal evidence is not a replacement for a strategy that will guide you through good times AND bad.

Single stock picking AND market timing is rarely a winning strategy in the long term.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

deikel
Posts: 1069
Joined: Sat Jan 25, 2014 7:13 pm

Re: Single stocks... would you?

Post by deikel » Thu Feb 20, 2020 12:51 pm

stocknoob4111 wrote:
Mon Feb 17, 2020 1:26 pm

that is the thing.. my friend was of the opinion that it was a sure bet picking up these stocks at a discount and so far this strategy has yielded great results, AAPL hit $140 in Dec 2018, now it's over 2X!!!
But that alone means nothing, because he has (presumably) not realized any gain (or loss) at this point. Its just funny money right now...or more like bragging money really...

If he sold it today and made all this money (good for him), what does he do with the money then ? Where is the next opportunity that is worthwhile having or does he now want to hold it forever until it needs selling in retirement ? At which point he would hope that the company is still around in say 30 years....that's questionable, but more important his 2x gain early on will likely dilute over the next 20 years...

...stock picking 'on the dip' and then holding it forever is not a strategy either.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

Topic Author
stocknoob4111
Posts: 1380
Joined: Sun Jan 07, 2018 12:52 pm

Re: Single stocks... would you?

Post by stocknoob4111 » Thu Feb 20, 2020 2:20 pm

deikel wrote:
Thu Feb 20, 2020 12:51 pm
...stock picking 'on the dip' and then holding it forever is not a strategy either.
a lot of people are of the opinion that it is inconceivable that companies like Apple and Google can go bust, just the mere suggestion elicits ridicule from these folks... hence it's considered low risk. I am of the mindset that nothing is guaranteed, not even the solvency of Apple or Google.

TNWoods
Posts: 89
Joined: Sun Feb 10, 2019 10:04 am

Re: Single stocks... would you?

Post by TNWoods » Thu Feb 20, 2020 2:30 pm

anoop wrote:
Thu Feb 20, 2020 10:12 am
Why? I am still getting the equivalent of 5% dividend on my cost basis.
That's not a valid way to look at it.

You must look at the return based on the present value, because the present value represents the amount you COULD be getting a return on elsewhere.

If you buy for $5.00, and the stock appreciates to $1000.00, and you are getting $1.00 per year in dividends, are you ecstatic about your "20%-cost-basis-return"? Or are you disappointed in getting 1/10th of one percent return on your $1000 asset?

You could sell and put that $1000 in just about anything and get more than $1.00.

TNWoods

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