Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

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arsenalfan
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by arsenalfan »

Consider:
1. Post the trade in real time on BH
2. Do in aftertax so you can TLH

I think everyone should do 1. Anonymous, and worst case someone makes fun. Best case someone buys alongside with you!

I invested 1% of my portfolio in stuff that I thought was unfairly punished. BoA, Ford, Volkswagen. Also some FOMO stocks like FANG. Bitcoin. Sounds like you have one in Tesla.

Wasn’t super fun, basically broke even. Didn’t want to bet more than I could let go to zero. So the smallish bets weren’t as captivating - found other hobbies.
Bama12
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by Bama12 »

Yes 5%
BogleFan510
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by BogleFan510 »

Nathan Drake wrote: Mon Oct 12, 2020 12:49 pm
BogleFan510 wrote: Mon Oct 12, 2020 11:39 am
hagridshut wrote: Mon Oct 12, 2020 10:23 am
Nathan Drake wrote: Sun Oct 11, 2020 3:16 pmwe would be talking about investing $50-100K in a risky basket of stocks, hoping to get a 10X multiplier over the coming decade in high-risk, high-potential companies that haven't already broken out completely (think: things that have recently IPO'd such as Palantir).

I know this is a very common topic, but I'm curious of those that have employed the strategy and whether they've been happy with the results (may be biased due to the performance of some hot stocks the past 10 years).
I recommend only doing this with companies in industries where you have very detailed knowledge that may not be apparent to others, and in which you have very high conviction. It is mentally very difficult to stick with a stock that may underperform for years, like AMZN, before the market wakes up and realizes that they have built something very valuable.

I know people who've owned shares of AMZN or TSLA, but they didn't have the knowledge or conviction to hold the shares long enough to realize any big gains. They got impatient, or scared by fearmongering Mainstream Media reports, or rattled by Wall Street "analysts" on TV who bashed the stock.

I don't discourage people from investing in game changing companies, but I do think that everyone should know that it is not an easy or quick process to get a 10x ROI. Results are also never guaranteed.
+1

I dont think as an earlier poster said that these bets skew negative, they are just higher varience (assuming one buys and never sells until money needed).

Agree patience is needed.

decided to remove too much personal info about 2 50x plus gains I held.
Interested in hearing more about your 50X plays....can you comment without it being too personal?
I did but deleted it, as I share too much as it is. I will note that I held both more than 10 years and the market recognized the value I felt was there about 8 years after I thought they should be rising. Some luck as one was, I think, the highest gaining stock of the 90s and the other one of the best of the 2010s. I didnt hold the first to the full peak. In both cases I list the greater part of my positions by writing way out of the money covered calls. The premiums were so high and they all but guaranteed 50% gains, but they cost me a lot of upside as I didnt replace the called options.

The OPs repky to my options caution didnt get my point. I was not talking about spreads, but pricing in general.
justglassin
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by justglassin »

I would definitely do it. But set up some rules. Someone earlier mentioned sticking to where you feel you some kind of edge or sense that you know something that others are missing. I don't buy many individual stocks, but on a few occasions I've come across some companies like Equinix (actually a REIT) and Cloudflare by virtue of some projects I've been on and ended up doing some informal research (i.e., the book "Tubes" was very relevant in this case, as was chatting up our IT/networking guys). These two have done very well relative to where I bought them, and if I have any regrets at this point it's that I didn't invest sooner and with more "conviction." But I don't want to press my luck so the rest of my Roth, Taxable and TSP all go into market-weight indexes with some dry powder in bonds/G fund/cash to rebalance at my AA.

The biggest lesson of the past year has been don't sit in cash. I missed the worst of the downturn, going 80% cash in late Feb, but the rebound was a face ripper and I didn't get back to my full AA until June(!).
DownToThis
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by DownToThis »

justglassin wrote: Mon Oct 12, 2020 7:21 pm I would definitely do it. But set up some rules. Someone earlier mentioned sticking to where you feel you some kind of edge or sense that you know something that others are missing. I don't buy many individual stocks, but on a few occasions I've come across some companies like Equinix (actually a REIT) and Cloudflare by virtue of some projects I've been on and ended up doing some informal research (i.e., the book "Tubes" was very relevant in this case, as was chatting up our IT/networking guys). These two have done very well relative to where I bought them, and if I have any regrets at this point it's that I didn't invest sooner and with more "conviction." But I don't want to press my luck so the rest of my Roth, Taxable and TSP all go into market-weight indexes with some dry powder in bonds/G fund/cash to rebalance at my AA.

The biggest lesson of the past year has been don't sit in cash. I missed the worst of the downturn, going 80% cash in late Feb, but the rebound was a face ripper and I didn't get back to my full AA until June(!).
It was a great day for cloudlfare (I own the stock as well). For me individual stocks scratch an itch. I'll probably learn my lesson at some point but until then it's a small percentage of my portfolio.
ccf
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by ccf »

DownToThis wrote: Mon Oct 12, 2020 8:24 pm
justglassin wrote: Mon Oct 12, 2020 7:21 pm Someone earlier mentioned sticking to where you feel you some kind of edge or sense that you know something that others are missing...

...Cloudflare by virtue of some projects I've been on and ended up doing some informal research
It was a great day for cloudlfare (I own the stock as well).

This made me laugh because I also own Cloudflare. Everyone is missing out but the three of us :P I had no idea it was a good day though. That's cool. Now I don't know if I want to keep holding. Isn't the stock picking game fun?!

I do the "play money" thing with 3-4% of my portfolio but it's not because I am trying to beat the market. It helps me leave my boring 3 fund portfolio alone.
Trader Joe
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by Trader Joe »

Nathan Drake wrote: Sun Oct 11, 2020 3:16 pm Little background, I'm mid 30s and reached Financial Independence 100% through a strict and simple adherence to Boglehead philosophy of index funds. It has given me a baseline standard of living that I could live off for the rest of my life.

Career wise, I'm in something slow and steady in STEM. It's a good upper middle class income, but there's literally no real chance at having any multipliers of salary due to bonus or otherwise. Essentially standard "living adjustments" yearly, with small promotions periodically. I didn't hit the lotto with a risky startup, nor am I in a highly lucrative field like Software Engineering that offers robust salaries or stock options.

I'm grateful for where I am, but I'm wondering if it makes sense to take a LITTLE more risk with a part of my portfolio? My NW is just a tad over 7 figures, so we would be talking about investing $50-100K in a risky basket of stocks, hoping to get a 10X multiplier over the coming decade in high-risk, high-potential companies that haven't already broken out completely (think: things that have recently IPO'd such as Palantir). If I lose that amount of money, then I'd be OK with that because it really doesn't meaningfully deplete the rest of my portfolio.

I know this is a very common topic, but I'm curious of those that have employed the strategy and whether they've been happy with the results (may be biased due to the performance of some hot stocks the past 10 years).
Definitely no.
Bill2020
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by Bill2020 »

ccf wrote: Mon Oct 12, 2020 8:33 pm
DownToThis wrote: Mon Oct 12, 2020 8:24 pm
justglassin wrote: Mon Oct 12, 2020 7:21 pm Someone earlier mentioned sticking to where you feel you some kind of edge or sense that you know something that others are missing...

...Cloudflare by virtue of some projects I've been on and ended up doing some informal research
It was a great day for cloudlfare (I own the stock as well).

This made me laugh because I also own Cloudflare. Everyone is missing out but the three of us :P I had no idea it was a good day though. That's cool. Now I don't know if I want to keep holding. Isn't the stock picking game fun?!

I do the "play money" thing with 3-4% of my portfolio but it's not because I am trying to beat the market. It helps me leave my boring 3 fund portfolio alone.
+1 on NET (Cloudflare)
langlands
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by langlands »

ccf wrote: Mon Oct 12, 2020 8:33 pm
DownToThis wrote: Mon Oct 12, 2020 8:24 pm
justglassin wrote: Mon Oct 12, 2020 7:21 pm Someone earlier mentioned sticking to where you feel you some kind of edge or sense that you know something that others are missing...

...Cloudflare by virtue of some projects I've been on and ended up doing some informal research
It was a great day for cloudlfare (I own the stock as well).

This made me laugh because I also own Cloudflare. Everyone is missing out but the three of us :P I had no idea it was a good day though. That's cool. Now I don't know if I want to keep holding. Isn't the stock picking game fun?!

I do the "play money" thing with 3-4% of my portfolio but it's not because I am trying to beat the market. It helps me leave my boring 3 fund portfolio alone.
I'm holding. You buy a growth stock because you think the company will innovate to deliver a product that is superior to others on the market. You can't sell every time the company actually succeeds in doing this.
skinsfan
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by skinsfan »

I'm in a similar situation as you and I recently decided to take a similar approach. I took about 2% and invested in one company that I think has potential for outsized returns. My rationale is that my overall future outlook won't be significantly impacted if that 2% underperforms the market or even goes to zero. But if I get lucky the upside can provide a potentially meaningful impact for me. My plan is to hold onto this investment long-term, not jump in and out of the market.

I recognize this is gambling on a long shot but I view it as having limited downside and potential for significant upside. I view this as different from buying lottery tickets or betting on a long-odds horse because there are a wider range of potential outcomes.
GoldenGoose
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by GoldenGoose »

KlangFool wrote: Mon Oct 12, 2020 1:41 pm
GoldenGoose wrote: Mon Oct 12, 2020 1:33 pm
KlangFool wrote: Mon Oct 12, 2020 11:36 am
rockstar wrote: Mon Oct 12, 2020 11:09 am The problem is when the play money grows faster than the rest of your portfolio. I put 5% into AMZN. It's now 9% of my portfolio. I put 5% into TQQQ. It's now 7% of my portfolio. The challenge is when to sell these.

rockstar,

You need a trading rule to play this kind of game. In my case, when it triples, I sell half of my holding.

KlangFool
Why would you want to sell solely based on price alone? If so then you would miss out a lot on MSFT, AAPL, AMZN when these companies were still in their growth trajectory.
GoldenGoose,

I would not miss out on MSFT, AAPL, and AMZN since I would not buy them anyhow. I only buy stock that has the potential to go up 10X to 30X in less than 5 years.


KlangFool
Does this mean you dont buy any stocks at all?
KlangFool
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by KlangFool »

GoldenGoose wrote: Mon Oct 12, 2020 9:51 pm
KlangFool wrote: Mon Oct 12, 2020 1:41 pm
GoldenGoose wrote: Mon Oct 12, 2020 1:33 pm
KlangFool wrote: Mon Oct 12, 2020 11:36 am
rockstar wrote: Mon Oct 12, 2020 11:09 am The problem is when the play money grows faster than the rest of your portfolio. I put 5% into AMZN. It's now 9% of my portfolio. I put 5% into TQQQ. It's now 7% of my portfolio. The challenge is when to sell these.

rockstar,

You need a trading rule to play this kind of game. In my case, when it triples, I sell half of my holding.

KlangFool
Why would you want to sell solely based on price alone? If so then you would miss out a lot on MSFT, AAPL, AMZN when these companies were still in their growth trajectory.
GoldenGoose,

I would not miss out on MSFT, AAPL, and AMZN since I would not buy them anyhow. I only buy stock that has the potential to go up 10X to 30X in less than 5 years.


KlangFool
Does this mean you dont buy any stocks at all?

I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.


KlangFool
SwampDonkey
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by SwampDonkey »

Similar situation as you.
I put all of my annual IRA and TSP contributions in Boglehead'ish ETFs. This is the vast majority of my annual retirement savings (~30k-32k'ish). Anything extra, I invest into a basket of stocks; this is a few thousand$ per year.

I've underperformed some years, outperformed some years. This year's been amazing - Apple, TradeDesk, MercadoLibre, Etsy, Pinterest ....along with several losers (dang you Luckin Coffee!). I'm okay with underperforming with this small portion of my portfolio as I really enjoy tracking the market, following stocks, listening to TMF podcasts, talking stocks with friends, etc.

With that being said, I REALLY wish I understood index investing earlier in my career as I made some really dumb stock buys when I first started investing. I was initially 100% in individual stocks and several went bankrupt. If I had started as a Boglehead, my current NW would be ~35% higher.
000
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by 000 »

KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current example of such a stock, or what process you use to decide which stocks have that potential?
Last edited by 000 on Mon Oct 12, 2020 10:24 pm, edited 1 time in total.
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topper1296
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by topper1296 »

I'm mainly indexed, but also have individual stocks. It is fun, educations and enjoyable for me and added bonus is that I beat the S&P. I say go for it, but know your limits, only invest in what you know and have an EXIT strategy. When and what to buy is the easy part. When to sell is the hardest part.
Tingting1013
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by Tingting1013 »

000 wrote: Mon Oct 12, 2020 10:01 pm
KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current or past example of such a stock, or how you decide which stocks have that potential?
Pretty much every stock in the WCLD index
000
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by 000 »

Tingting1013 wrote: Mon Oct 12, 2020 10:21 pm
000 wrote: Mon Oct 12, 2020 10:01 pm
KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current or past example of such a stock, or how you decide which stocks have that potential?
Pretty much every stock in the WCLD index
How would one have known that in advance?
Tingting1013
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by Tingting1013 »

000 wrote: Mon Oct 12, 2020 10:24 pm
Tingting1013 wrote: Mon Oct 12, 2020 10:21 pm
000 wrote: Mon Oct 12, 2020 10:01 pm
KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current or past example of such a stock, or how you decide which stocks have that potential?
Pretty much every stock in the WCLD index
How would one have known that in advance?
Work in the industry.
See early customer-product traction.
Realize an epochal tech shift is at hand.
Hedge your bets by investing in every startup in the space.
langlands
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by langlands »

Tingting1013 wrote: Mon Oct 12, 2020 10:27 pm
000 wrote: Mon Oct 12, 2020 10:24 pm
Tingting1013 wrote: Mon Oct 12, 2020 10:21 pm
000 wrote: Mon Oct 12, 2020 10:01 pm
KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current or past example of such a stock, or how you decide which stocks have that potential?
Pretty much every stock in the WCLD index
How would one have known that in advance?
Work in the industry.
See early customer-product traction.
Realize an epochal tech shift is at hand.
Hedge your bets by investing in every startup in the space.
Why does one have to know in advance? You don't think some of those stocks still have 10x potential in the next 5 years?
Independent George
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by Independent George »

I'm 100% ok with setting aside some play money for individual stocks. As long as you're honest with yourself about how much you can afford to risk, go ahead. It's not something I would do, but as long as you can truly afford to lose the money without losing any sleep, and you limit yourself to that amount, I don't see the problem. The best case scenario is you'll add a bit to your portfolio. The worst case scenario is you'll lose some money you could afford to lose.
l1am
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by l1am »

I do, same age and ~NW as you. I have a couple of individual stocks and 5% is more wild.

Just don't pick too many different play options since they're all -EV vs. broad index funds.
Topic Author
Nathan Drake
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by Nathan Drake »

skinsfan wrote: Mon Oct 12, 2020 8:58 pm I'm in a similar situation as you and I recently decided to take a similar approach. I took about 2% and invested in one company that I think has potential for outsized returns. My rationale is that my overall future outlook won't be significantly impacted if that 2% underperforms the market or even goes to zero. But if I get lucky the upside can provide a potentially meaningful impact for me. My plan is to hold onto this investment long-term, not jump in and out of the market.

I recognize this is gambling on a long shot but I view it as having limited downside and potential for significant upside. I view this as different from buying lottery tickets or betting on a long-odds horse because there are a wider range of potential outcomes.

Interesting, if you don’t mind me asking what is the company you are investing in, and do you know that industry well?
MathIsMyWayr
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by MathIsMyWayr »

Nathan Drake wrote: Sun Oct 11, 2020 11:18 pm
flaccidsteele wrote: Sun Oct 11, 2020 11:05 pm Why have play money when it’s so simple to make money without playing?

Spend it on something your family wants

Personally I wouldn’t consider $1m NW in mid-30s to be financially independent
The idea is to try and accelerate growth in NW since it’s not as possible with the career, and while BH is great for 90% of your investing as the bulk of our progression over time, the other 10% potentially hitting it big could have a very meaningful impact placed in the right assets.

My expenses have been less than <30k ever since I started working, so I consider a sub 3% SWR to be FI even though i don’t want to retire
If OP is absolutely sure that he will not touch $1m for the next 30 years, I would consider him FI with $1m in his mid 30s. With a real 4% return, $1m will be worth over $3m after 30 years.
Will you be satisfied with an annual spending <$30k for the rest of your life? :confused
MathIsMyWayr
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by MathIsMyWayr »

Nathan Drake wrote: Mon Oct 12, 2020 10:33 am
David Jay wrote: Mon Oct 12, 2020 9:52 am
Nathan Drake wrote: Sun Oct 11, 2020 11:23 pm
luckyducky99 wrote: Sun Oct 11, 2020 11:15 pm The problem is with this part:
Nathan Drake wrote: Sun Oct 11, 2020 3:16 pm "in a risky basket of stocks, hoping to get a 10X multiplier"
because you're never going to get 10x from the whole basket. If you're lucky, you get one or two winners. My dad does this. Yeah, he did really well investing in Amgen and Starbux in the late 90s and still holds them. He likes to talk about them. How many others does he still talk about? None. He also used to talk about a company called Evergreen Solar. It no longer exists (and not because it got bought out). I haven't asked because it's none of my business, but I suspect he's done worse than the market, and I know (based on my parents' lifestyle) that he never "hit it big".

Basically, the dispersion of outcomes from this kind of strategy skews overwhelmingly negative, because most of the time you don't even get the one or two winners.
Nathan Drake wrote: Sun Oct 11, 2020 3:16 pm If I lose that amount of money, then I'd be OK with that because it really doesn't meaningfully deplete the rest of my portfolio.
There's a cognitive / behavioral mistake hidden in here, which is that you're saying "I'm willing to take a lot of risk with 10% of my portfolio, but that's ok because the other 90% of my portfolio has the right amount of risk for me." This is mental accounting, arbitrarily and subjectively dividing your portfolio into parts with different characteristics. You should consider the risk of your whole portfolio instead. It sounds like you're willing to take an extra 10% loss, so the standard advice around here is to hold fewer bonds/cash and increase your equity allocation by 20%. If you're already at >80%, then leverage is what you want.

All of this advice assumes you're willing to pass on the possibility of winning the lottery. Again, most people around here are happy with that tradeoff -- investment vs speculation. And you will, on average, get a more reliably better return by just turning up equity allocation then trying to bet on risky individual stocks.

If you are determined to play a lottery, then it really comes down to luck I think. Good luck.

I see your point, but I am currently 100% stocks, and the idea of leverage on index funds or small cap tilts doesn’t interest me as much as holding onto a small group of stocks that are very high risk/ high reward plays
You are starting from the assumption that you can select a small group of stocks that will outperform the market. Having tried, I can tell you that the odds of getting even one “ten bagger” is low. And if you hold 10 stocks, then one 10x stock will only double your money. And if that money is only 5% of your portfolio then you have only increased your portfolio earnings by 10%.

You are buying into a dream, just like buying a lottery ticket. But it’s your money and your choice, clearly you are enamored with this thought such that it doesn’t matter what folks say on this thread.

Keep good records and re-evaluate after 5 years. It won’t look as appealing by then if you actually keep good records. See you in 2025 :wink:

Good point.

I guess what started this thread is the fact that I’ve been a fan of Tesla since their inception, but decided to not invest because at the time (2008) I was just starting my career and went 100% boglehead (the right move) to get a firm financial foundation

Seeing their meteoric rise has left me with some regret about not putting in a very small allocation to companies I truly believe in, and holding them through thick and thin.
Great.
Now the story is becoming more and more familiar somehow. This is where it all begins.:wink:
GoldenGoose
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by GoldenGoose »

rockstar wrote: Mon Oct 12, 2020 1:45 pm
Bill2020 wrote: Mon Oct 12, 2020 1:33 pm
Brianmcg321 wrote: Mon Oct 12, 2020 11:08 am Get a boat if you want something to play with.
Having owned a few boats...

BOAT = Break out another thousand.

Two best days owning a boat - the day you buy it and the day you sell it.
I know someone that owns a boat. She loves it. She tells anyone that buys a boat that it's a bigger money pit than a home. But she loves it.

Another person I know belongs to a boat club that owns a bunch of boats. He pays a monthly membership fee for the club. He loves boating, but he doesn't want to make a huge commitment.

Sometimes you have to spend money on stuff that makes you happy but costs a lot. For me that's outdoor gear. My big splurge is cottage industry backpacking gear. DCF gear isn't cheap. But it's nowhere near as expensive as owning a plane or boat. I'd rather spend that money traveling to places to go exploring. I spend a lot in airfare every year.

It's important to know what makes you happy. I'm most happy when I'm on a trail, which happens to be really cheap. If I really want to spend a lot, I could get an off road capable vehicle, which is on my list. Thinking about getting a nice off road truck for my 50th.
Not sure why owning a boat would always be a money pit. Does it depend on the kind of boat? I mean it is like a car. It has a body and a motor. What are the costs and how much?
GoldenGoose
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by GoldenGoose »

Tingting1013 wrote: Mon Oct 12, 2020 10:21 pm
000 wrote: Mon Oct 12, 2020 10:01 pm
KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current or past example of such a stock, or how you decide which stocks have that potential?
Pretty much every stock in the WCLD index
then what are you doing on a BH forum? Why don't you buy them stocks and make 30X 50X returns? This is a boring 8% annual return forum.
GoldenGoose
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by GoldenGoose »

000 wrote: Mon Oct 12, 2020 10:01 pm
KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current example of such a stock, or what process you use to decide which stocks have that potential?
Yeah, I am interested to hear too. As well as many other members.
Tingting1013
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by Tingting1013 »

GoldenGoose wrote: Tue Oct 13, 2020 4:24 am
Tingting1013 wrote: Mon Oct 12, 2020 10:21 pm
000 wrote: Mon Oct 12, 2020 10:01 pm
KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current or past example of such a stock, or how you decide which stocks have that potential?
Pretty much every stock in the WCLD index
then what are you doing on a BH forum? Why don't you buy them stocks and make 30X 50X returns? This is a boring 8% annual return forum.
I do have low six figures invested in WCLD.

But more to the point, the most popular post in the history of Bogleheads is about a leveraged strategy using 3x ETFs that returns 20-30% CAGR. 10,000 posts and counting.

So I think I’m in exactly the right place.
GoldenGoose
Posts: 329
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by GoldenGoose »

Tingting1013 wrote: Tue Oct 13, 2020 5:30 am
GoldenGoose wrote: Tue Oct 13, 2020 4:24 am
Tingting1013 wrote: Mon Oct 12, 2020 10:21 pm
000 wrote: Mon Oct 12, 2020 10:01 pm
KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current or past example of such a stock, or how you decide which stocks have that potential?
Pretty much every stock in the WCLD index
then what are you doing on a BH forum? Why don't you buy them stocks and make 30X 50X returns? This is a boring 8% annual return forum.
I do have low six figures invested in WCLD.

But more to the point, the most popular post in the history of Bogleheads is about a leveraged strategy using 3x ETFs that returns 20-30% CAGR. 10,000 posts and counting.

So I think I’m in exactly the right place.
Only low 6 figures in a place where just about every stocks can gain 30X? Gosh. If I found a magical place like that I would be 9 figures in, dont you think?
ny_rn
Posts: 478
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by ny_rn »

Bill2020 wrote: Mon Oct 12, 2020 8:44 pm
ccf wrote: Mon Oct 12, 2020 8:33 pm
DownToThis wrote: Mon Oct 12, 2020 8:24 pm
justglassin wrote: Mon Oct 12, 2020 7:21 pm Someone earlier mentioned sticking to where you feel you some kind of edge or sense that you know something that others are missing...

...Cloudflare by virtue of some projects I've been on and ended up doing some informal research
It was a great day for cloudlfare (I own the stock as well).

This made me laugh because I also own Cloudflare. Everyone is missing out but the three of us :P I had no idea it was a good day though. That's cool. Now I don't know if I want to keep holding. Isn't the stock picking game fun?!

I do the "play money" thing with 3-4% of my portfolio but it's not because I am trying to beat the market. It helps me leave my boring 3 fund portfolio alone.
+1 on NET (Cloudflare)
I'm holding Cloudflare (NET) as well. Been in since ~ $16.
KlangFool
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by KlangFool »

000 wrote: Mon Oct 12, 2020 10:01 pm
KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current example of such a stock, or what process you use to decide which stocks have that potential?
1) I was looking at SLV. But, decided against it.

2) In general, I buy stock with capitalization less than 1 billion with interesting technology.

KlangFool
flaccidsteele
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Location: Canada

Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by flaccidsteele »

000 wrote: Sun Oct 11, 2020 9:27 pm If I'm going to play with my money, it will be by spending it.
+1 this
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
GoldenGoose
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by GoldenGoose »

KlangFool wrote: Tue Oct 13, 2020 7:33 am
000 wrote: Mon Oct 12, 2020 10:01 pm
KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current example of such a stock, or what process you use to decide which stocks have that potential?
1) I was looking at SLV. But, decided against it.

2) In general, I buy stock with capitalization less than 1 billion with interesting technology.

KlangFool
Did you buy any stocks that you thought would give you 30X or 50X in less than 5 years per your post?
KlangFool
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Joined: Sat Oct 11, 2008 12:35 pm

Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by KlangFool »

GoldenGoose wrote: Tue Oct 13, 2020 7:43 am
KlangFool wrote: Tue Oct 13, 2020 7:33 am
000 wrote: Mon Oct 12, 2020 10:01 pm
KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current example of such a stock, or what process you use to decide which stocks have that potential?
1) I was looking at SLV. But, decided against it.

2) In general, I buy stock with capitalization less than 1 billion with interesting technology.

KlangFool
Did you buy any stocks that you thought would give you 30X or 50X in less than 5 years per your post?
I did. But, it is no longer fun for me. So, I stop doing it.

KlangFool
Nowizard
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by Nowizard »

There are many who do have what they call "Play money," but looking for a 10X multiplier is not playing, nor is a 10% allocation to play money. It would be helpful if you were more certain about whether you are just "itchy" or whether your primary goal is marked appreciation in a short period of time. Having obtained what you feel is a secure financial future at a young age is fortunate and deserving of congratulations. However, it also suggests that consideration of establishing more of a preservation portfolio than accumulative one is something to consider. Are there folks who do what you suggest? Of course, and I am very familiar with one person who has done just that for many years. You won't get a lot of approval for that on this site, though. Generally, you don't have to be right with investment decisions, just have the expectation of due diligence followed by action and willingness to accept the consequences of your decisions.

Tim
Chicken Little
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by Chicken Little »

I think the danger here is doing well in a rising market. In 2000 there were stories about people quitting their jobs to trade options. In 2007 there were stories about people quitting their jobs to flip houses. When the markets turned, those new occupations weren’t so easy.

So you’re not going to quit your job, you’re still considering this in a rising market. A market that even shrugged off a pandemic (with plenty of help, by the way).

I don’t believe in play money either. If you’re going to invest outside of an index, I think you at least need a plan that makes sense.

I think you also need to have the wherewithal to pull the ripcord if the overall market turns. For as much as you might benefit from increased risk in a rising market, it would be difficult to see how that wouldn’t work against you if you are long and the market turns.
wolf359
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by wolf359 »

At about $1 million, you have a degree of financial independence, but you are probably not fully FI. You are fully FI when, at a minimum, 4% of your investments will cover your current and projected annual expenses. If you have an upper middle class lifestyle, your expenses are probably around $80K-$100K/year. $1 million covers only $40K/year for 30 years. You are FI enough to take risks with your career and not have to worry about a paycheck for years, but you can't live without additional income indefinitely.

The good news is that you will probably achieve full FI by just waiting long enough. Your portfolio is large enough that if you keep it invested, it will achieve an appropriate size in another 10-20 years, even if you add nothing more. If you keep adding to it, you can probably achieve your goal in 5-10 years.

The bad news is that this is all boring. All you're doing is waiting, letting compounding work for you, and letting the index do its thing. You're achieving the ability to live without a job or other external income, but your lifestyle won't otherwise change. You won't get filthy rich, and you won't be able to brag to your friends about how hard you worked to achieve your success.

I suggest you project out your savings and investment plan so that you will achieve full FI within the timeframe that is acceptable to you. Lock that savings rate in, and you're done.

If you want to play after that, take a fixed amount from your portfolio and set it aside. Segregate it, so it no longer counts as part of your portfolio. Set up the rules for the play account, such as not replenishing it, and what you will do if it hits a certain size. Write these rules down, and follow them. Do not mix your play funds with your regular investment account.

I'd recommend that you actually do something completely different with the funds that you allocate for play money. You're already going to achieve FI using the stock market, so you should do something that isn't correlated to the market. Look at starting a business. Consider investing in real estate. Explore hard money loans. When you're directly trading stocks, the person on the other end of the trade is a professional. The pros have more resources than you, and more knowledge than you. If you want to hit a home run, you should try to do it with something you directly control, in which you can exercise your expertise. If you don't have any expertise, then perhaps you should keep index investing until you spot an opportunity that you do.

At 35, the best that you can do with your "play money" is to invest in your education and building up your job skills (human capital, making you worth more professionally). This improves something that you already have expertise in, and is fun because it improves skills you already have an interest in, and lets you fund training that your company has no say in approving. However, to hit it big, you need to see if you can create income streams that aren't leveraging "time for money." Try to pursue opportunities that make your income scalable, like creating courses teaching what you know, or learning how to create reference materials for people in your profession.

The idea that you're going to get rich quick on the stock market is a fantasy. It is possible, but the people who did it took tremendous risks to do so. You remember Tesla because it has done well. The problem is that thinking of owning Tesla and actually owning Tesla are two different things. The stock doesn't go in a straight line. It is frequently up and down. Having a significant amount of money in a stock like that is a rollercoaster.

Do you remember any of other stocks you've thought of investing in over the years? When you think a stock is a great investment, write it down in a notebook and write a date. Write down an amount of money that you'd be willing to wager on that (that indicates how sure you are about this.) Then periodically go back into the notebook and look up the results in http://www.stockchoker.com. That site will tell you how any given stock would have fared.

It's important to write it down, because your brain tends to only remember the winners, and forget the losers. It is also important that if you start a stock play account, that you calculate your actual returns accurately. Don't forget to include the impact of taxes as well.
Last edited by wolf359 on Tue Oct 13, 2020 11:06 am, edited 1 time in total.
GoldenGoose
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by GoldenGoose »

KlangFool wrote: Tue Oct 13, 2020 8:00 am
GoldenGoose wrote: Tue Oct 13, 2020 7:43 am
KlangFool wrote: Tue Oct 13, 2020 7:33 am
000 wrote: Mon Oct 12, 2020 10:01 pm
KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current example of such a stock, or what process you use to decide which stocks have that potential?
1) I was looking at SLV. But, decided against it.

2) In general, I buy stock with capitalization less than 1 billion with interesting technology.

KlangFool
Did you buy any stocks that you thought would give you 30X or 50X in less than 5 years per your post?
I did. But, it is no longer fun for me. So, I stop doing it.

KlangFool
Lol. Ok. Whatever you say.
000
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by 000 »

KlangFool wrote: Tue Oct 13, 2020 7:33 am
000 wrote: Mon Oct 12, 2020 10:01 pm
KlangFool wrote: Mon Oct 12, 2020 9:59 pm I do not buy any individual stock that does not have the potential to go up 10X to 30X in less than 5 years.
Can you give us a current example of such a stock, or what process you use to decide which stocks have that potential?
1) I was looking at SLV. But, decided against it.

2) In general, I buy stock with capitalization less than 1 billion with interesting technology.

KlangFool
Thanks
CRJPylote
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by CRJPylote »

I have 5% "Play Money" but it is in the HEDGEFUNDIE 3x strategy not stocks. Looking at things like the NKLA news and other stocks that have fallen from grace, I think a individual stock is too risky. Personally once you are 100% equity, I'd rather leverage, and still have diversification.
User avatar
Random Musings
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Location: Pennsylvania

Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by Random Musings »

Back in the day, the finance professors at CMU (and there were a few good ones) were already in the passive camp. Max of 3% play money as I recall.

RM
I figure the odds be fifty-fifty I just might have something to say. FZ
Willmunny
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Re: Individual Stocks - 5-10% of Portfolio "Play Money" - YES or NO?

Post by Willmunny »

I have a couple HSA accounts due to a job change and one of them being the option given by a prior employer. The prior account is at a good major brokerage firm. I have not spent the prior account down fully and I haven't rolled it over. It is less than 1% of NW. I am over 40 years old and I have never bought a stock. I know that HSA space is precious, but I must admit I am sort of tempted to use this as a "go big or go home" individual stock picking account. I could certainly open a taxable account, but the tax reporting of frequent trading makes me have no interest in doing that.

The amount is so small that it won't make a material difference either way. I think the thing that I am most afraid of is that I am very successful (lucky) with it and it tempts me into dipping into more substantial accounts for such activity.
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