Why not go all aggressive? The risk seems about the same....

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CodeMaster
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Why not go all aggressive? The risk seems about the same....

Post by CodeMaster » Tue Jan 14, 2020 11:50 am

So Ive been investing mutual funds all my life and I was studying its history and thinking about past...

Say a person still had decades before they ever wanted to retire.

Im a big tech fund guy, its here to stay, its not some fund that may disappear, the world is centered on tech. Tech funds also perform the best long term wise, of course they crash the hardest during down times but thats all irrelevant I think if you buy and hold forever.

During a crash, all funds crash almost the same... tech fund or the "safe" 500 funds all crash hard, tech virtually just a litte more then the "safer" funds . So it seems virtually unnecessary to try to play it "safe" and one should diversify but not be afraid to go tech heavy expecting the ultimate end result long term returns to be greatest that way.

Given that majority of my portfolio is in tech funds, I have a nice share also of sp500, nasdaq, dow indexes and health indexes.

I was wondering if anyone saw any real flaw in this theory or your thoughts on this strategy?

Truly appreciate the tips! :sharebeer :beer

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White Coat Investor
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Re: Why not go all aggressive? The risk seems about the same....

Post by White Coat Investor » Tue Jan 14, 2020 11:54 am

Google "NASDAQ in 2000" or look at historical returns of QQQ.
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snailderby
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Re: Why not go all aggressive? The risk seems about the same....

Post by snailderby » Tue Jan 14, 2020 11:56 am

1. Compare XLK's returns to VTSMX since XLK's inception: https://www.portfoliovisualizer.com/bac ... ion2_2=100.

2. Past performance aside, what makes you think tech will perform better than the total stock market going forward?

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Re: Why not go all aggressive? The risk seems about the same...

Post by theorist » Tue Jan 14, 2020 11:58 am

Investing exclusively in tech funds is putting a large bet on the upper right hand corner of the Morningstar style box — large growth funds. Growth has performed very well in the last decade. However over many periods, value stocks — the left edge of the style box — have outperformed growth. In fact the standard lore is that there is a “value premium” shown in long term historical performance, though it can take a LONG time to show up. If this is still true, then one might expect value to outperform growth again sometime (who knows when) in a long term investor’s future, and to do so in aggregate over a long period of time. This would argue against a big tech bet...

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Re: Why not go all aggressive? The risk seems about the same....

Post by watchnerd » Tue Jan 14, 2020 11:59 am

CodeMaster wrote:
Tue Jan 14, 2020 11:50 am
So Ive been investing mutual funds all my life and I was studying its history and thinking about past...

Say a person still had decades before they ever wanted to retire.

Im a big tech fund guy, its here to stay, its not some fund that may disappear, the world is centered on tech. Tech funds also perform the best long term wise, of course they crash the hardest during down times but thats all irrelevant I think if you buy and hold forever.

During a crash, all funds crash almost the same... tech fund or the "safe" 500 funds all crash hard, tech virtually just a litte more then the "safer" funds . So it seems virtually unnecessary to try to play it "safe" and one should diversify but not be afraid to go tech heavy expecting the ultimate end result long term returns to be greatest that way.

Given that majority of my portfolio is in tech funds, I have a nice share also of sp500, nasdaq, dow indexes and health indexes.

I was wondering if anyone saw any real flaw in this theory or your thoughts on this strategy?

Truly appreciate the tips! :sharebeer :beer
The elephant in the room: looming government regulation

Privacy laws could blow up the business models of Facebook, Twitter, Google.

There will of course be new tech companies, but you could have a dry spell lasting a decade. If you were diversified, you don't have this problem as much.
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Re: Why not go all aggressive? The risk seems about the same....

Post by rbaldini » Tue Jan 14, 2020 12:03 pm

CodeMaster wrote:
Tue Jan 14, 2020 11:50 am
During a crash, all funds crash almost the same... tech fund or the "safe" 500 funds all crash hard, tech virtually just a litte more then the "safer" funds . So it seems virtually unnecessary to try to play it "safe" and one should diversify but not be afraid to go tech heavy expecting the ultimate end result long term returns to be greatest that way.
Do we really have enough data to conclude that? "Tech" as a substantial industry as we know it today has only existed for a few decades, no? I'm not saying that you're wrong, but could you share how you arrived at this conclusion?

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JMacDonald
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Re: Why not go all aggressive? The risk seems about the same....

Post by JMacDonald » Tue Jan 14, 2020 12:05 pm

I hold the Vanguard Total Stock Market Fund. The top five holding are big tech:
https://investor.vanguard.com/mutual-fu ... olio/vtsax
That is enough for me.
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Re: Why not go all aggressive? The risk seems about the same....

Post by Schlabba » Tue Jan 14, 2020 12:09 pm

CodeMaster wrote:
Tue Jan 14, 2020 11:50 am
So Ive been investing mutual funds all my life and I was studying its history and thinking about past...

Say a person still had decades before they ever wanted to retire.

Im a big tech fund guy, its here to stay, its not some fund that may disappear, the world is centered on tech. Tech funds also perform the best long term wise, of course they crash the hardest during down times but thats all irrelevant I think if you buy and hold forever.

During a crash, all funds crash almost the same... tech fund or the "safe" 500 funds all crash hard, tech virtually just a litte more then the "safer" funds . So it seems virtually unnecessary to try to play it "safe" and one should diversify but not be afraid to go tech heavy expecting the ultimate end result long term returns to be greatest that way.

Given that majority of my portfolio is in tech funds, I have a nice share also of sp500, nasdaq, dow indexes and health indexes.

I was wondering if anyone saw any real flaw in this theory or your thoughts on this strategy?

Truly appreciate the tips! :sharebeer :beer
The risk isn’t the same. You are measuring risk as a maximum drawdown but you can also think of risk in total return.

You run the risk of underperforming the stock market. If you own the stock market you will never loose to it.
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Re: Why not go all aggressive? The risk seems about the same....

Post by KlangFool » Tue Jan 14, 2020 12:35 pm

CodeMaster wrote:
Tue Jan 14, 2020 11:50 am

I think if you buy and hold forever.
CodeMaster,

Unless you do not need to spend that money, how can you hold forever?

<<Say a person still had decades before they ever wanted to retire. >>

There is such a thing as involuntary retirement, permanently unemployed, and permanently under-employed too. Life happened! It does not have to turn out as someone wanted. I wanted 10 million but it does not mean I will get it.

KlangFool

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Re: Why not go all aggressive? The risk seems about the same....

Post by TheDDC » Tue Jan 14, 2020 12:48 pm

I guess it depends on your definition of "aggressive". I am 100/0 and really don't see why one shouldn't be unless one would need the money sooner than 5 years or so. But within 100% equities sure you could be invested in QQQ, which I could consider foolish. I would consider that "aggressive". 100% VTSAX isn't really as aggressive when you think of it that way.

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Re: Why not go all aggressive? The risk seems about the same....

Post by azanon » Tue Jan 14, 2020 1:00 pm

I remember being young and being in all tech funds starting around the mid to late 90s. OP, it didn't end well.

My other point is this - you're discussing observations about what happened in the past, and for some reason, are concluding that the future will equal the past. If you can give me some kind of assurance that will actually be the case, I'll switch to mostly/all tech funds too.

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Re: Why not go all aggressive? The risk seems about the same....

Post by prioritarian » Tue Jan 14, 2020 1:01 pm

watchnerd wrote:
Tue Jan 14, 2020 11:59 am
"...looming government regulation."
This is a political statement. I thought these were not allowed here.

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Re: Why not go all aggressive? The risk seems about the same....

Post by watchnerd » Tue Jan 14, 2020 1:07 pm

prioritarian wrote:
Tue Jan 14, 2020 1:01 pm
watchnerd wrote:
Tue Jan 14, 2020 11:59 am
"...looming government regulation."
This is a political statement. I thought these were not allowed here.
I'm not advocating for or against it.

I'm just noting that it is in the news and would have business impact.
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Stef
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Re: Why not go all aggressive? The risk seems about the same....

Post by Stef » Tue Jan 14, 2020 1:09 pm

Just because Amazon was a great investment in the last 30 years, it doesn't mean that it will be great for the next 30 years. Tech is just one sector of many. The higher risk with a less diversified portfolio due to investing only in tech isn't automatically compensated with a higher return.

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Re: Why not go all aggressive? The risk seems about the same....

Post by B. Wellington » Tue Jan 14, 2020 1:16 pm

You may want to seriously go back and study some market history you speak of.

There were many "paper millionaire retirees" in 1999-2000. For many, it didn't end well and some were forced to work additional years to recover from those losses.

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Re: Why not go all aggressive? The risk seems about the same....

Post by danielc » Tue Jan 14, 2020 2:04 pm

CodeMaster wrote:
Tue Jan 14, 2020 11:50 am
So Ive been investing mutual funds all my life and I was studying its history and thinking about past...

Say a person still had decades before they ever wanted to retire.

Im a big tech fund guy, its here to stay, its not some fund that may disappear, the world is centered on tech. Tech funds also perform the best long term wise, of course they crash the hardest during down times but thats all irrelevant I think if you buy and hold forever.
It is extremely difficult to predict winners. Apple didn't look like a good investment the day before Microsoft suddenly decided to rescue them because they thought that throwing a lifeline at their only remaining competitor might help Microsoft's antitrust case. Yahoo! is another example of things not turning out the way many people expected. They used to be the hot stock. This is what happened to them:
  • 1998: Yahoo! refuses to buy Google for $1M
  • 2002: Yahoo! tries to buy Google for $3B. Google says "give me $5B". Yahoo! says "no".
  • 2008: Microsoft offers to buy Yahoo! for $40B. Yahoo! says "no".
  • 2016: Yahoo! sold for $4.6B to Verizon.
CodeMaster wrote:
Tue Jan 14, 2020 11:50 am
During a crash, all funds crash almost the same... tech fund or the "safe" 500 funds all crash hard, tech virtually just a litte more then the "safer" funds.
Huh? dot-com bubble?
CodeMaster wrote:
Tue Jan 14, 2020 11:50 am
So it seems virtually unnecessary to try to play it "safe" and one should diversify but not be afraid to go tech heavy expecting the ultimate end result long term returns to be greatest that way.

Given that majority of my portfolio is in tech funds, I have a nice share also of sp500, nasdaq, dow indexes and health indexes.

I was wondering if anyone saw any real flaw in this theory or your thoughts on this strategy?
I think you have not internalized the fact that if one stock is riskier, by definition, that means that there is a very real chance that it will turn out very badly for you. If that wasn't the case, we wouldn't call them risky.

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Re: Why not go all aggressive? The risk seems about the same....

Post by rascott » Tue Jan 14, 2020 2:08 pm

White Coat Investor wrote:
Tue Jan 14, 2020 11:54 am
Google "NASDAQ in 2000" or look at historical returns of QQQ.

Yep, there've been tremendous returns after all the fake tech companies with zero earnings (or even sales) were washed out of the market.
Last edited by rascott on Tue Jan 14, 2020 2:13 pm, edited 1 time in total.

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Re: Why not go all aggressive? The risk seems about the same....

Post by nisiprius » Tue Jan 14, 2020 2:12 pm

QQQ is a famous ETF which tracks the NASDAQ-100 and is strongly tech-heavy. It has $91 billion invested in it. It's currently 44% technology + 21% communications, so it's about 2/3rds tech and telecom.

It had its inception 3/10/1999. Let's compare an investment in QQQ starting at that date to someone investing in VTI, the Vanguard Total Stock Market Index Fund. (S&P 500 would be about the same for everything I'm going to say).

Someone who invested $10,000 it QQQ right from the start would have doubled their money in less than a year. It would then have lost more than 80% of its value while the stock market as a whole was losing 43% of its value. On 9/30/2002, the QQQ investor would have had $4,062 while the VTI investor had $7,018.

Source

Image

So from the same start, the tech-heavy QQQ investor briefly had double the money of the VTI investor, then not much more than half, all with a period of less than three years.

The QQQ investor had to weight eight years to get back to even with the $10,000 he started with, by which time the VTI investor was up to $15,000. The QQQ investor had to wait until March of 2017, eighteen years, to pull up even with VTI.

And that's getting in at the earliest possible date and avoiding as much as possible of the tech bubble. An investor who bought it anywhere near the top would still be behind VTI today. Of course, someone who was lucky or shrewd enough to buy in near the bottom would have done far better than VTI.

Would you really call that "about the same risk?"
Last edited by nisiprius on Tue Jan 14, 2020 2:14 pm, edited 2 times in total.
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Re: Why not go all aggressive? The risk seems about the same....

Post by 3funder » Tue Jan 14, 2020 2:12 pm

JMacDonald wrote:
Tue Jan 14, 2020 12:05 pm
I hold the Vanguard Total Stock Market Fund. The top five holding are big tech:
https://investor.vanguard.com/mutual-fu ... olio/vtsax
That is enough for me.
+1. That is more than enough for me.

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Re: Why not go all aggressive? The risk seems about the same....

Post by danielc » Tue Jan 14, 2020 2:13 pm

Schlabba wrote:
Tue Jan 14, 2020 12:09 pm
You run the risk of underperforming the stock market. If you own the stock market you will never loose to it.
I really don't get this view of risk. Why do you anchor against the stock market? Which stock market? The global one or the US one? (or some other stock market?).

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Re: Why not go all aggressive? The risk seems about the same....

Post by rascott » Tue Jan 14, 2020 2:15 pm

nisiprius wrote:
Tue Jan 14, 2020 2:12 pm
QQQ is a famous ETF which tracks the NASDAQ-100 and is strongly tech-heavy. It has $91 billion invested in it. It's currently 44% technology + 21% communications, so it's about 2/3rds tech and telecom.

It had its inception 3/10/1999. Let's compare an investment in QQQ starting at that date to someone investing in VTI, the Vanguard Total Stock Market Index Fund. (S&P 500 would be about the same for everything I'm going to say).

Someone who invested $10,000 it QQQ right from the start would have doubled their money in less than a year. It would then have lost more than 80% of its value while the stock market as a whole was losing 43% of its value. On 9/30/2002, the QQQ investor would have had $4,062 while the VTI investor had $7,018.

Source

Image

So from the same start, the tech-heavy QQQ investor briefly had double the money of the VTI investor, then not much more than half, all with a period of less than three years.

The QQQ investor had to weight eight years to get back to even with the $10,000 he started with, by which time the VTI investor was up to $15,000. The QQQ investor had to wait until March of 2017, eighteen years, to pull up even with VTI.

And that's getting in at the earliest possible date and avoiding as much as possible of the tech bubble. An investor who bought it anywhere near the top would still be behind VTI today. Of course, someone who was lucky or shrewd enough to buy in near the bottom would have done far better than VTI.

Would you really call that "about the same risk?"
Sure and pop in the numbers since 2003 and get a much different story. Everyone knows (or should know) the history of the internet/ tech bubble.... and it's basically totally irrelevant to what the industry looks like today.

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Re: Why not go all aggressive? The risk seems about the same....

Post by whodidntante » Tue Jan 14, 2020 2:16 pm

Probably you are best off applying leverage if your risk tolerance is nearly unlimited and your total future expected income is enormous. But tech stocks as we understand it today may not be the final big trend in equities. I'm guessing it won't be. So I would apply that leverage to diversified equities instead of making a sector bet. Or you could overweight small cap value which has had a similar performance to leveraged equity over the long term, since those companies tend to he highly leveraged. In other words, consider doing precisely the opposite of what you proposed.

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Re: Why not go all aggressive? The risk seems about the same....

Post by nisiprius » Tue Jan 14, 2020 2:18 pm

CodeMaster wrote:
Tue Jan 14, 2020 11:50 am
...Im a big tech fund guy, its here to stay, its not some fund that may disappear, the world is centered on tech...
Care to name the specific "tech fund?"
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Re: Why not go all aggressive? The risk seems about the same....

Post by almostretired1965 » Tue Jan 14, 2020 2:24 pm

B. Wellington wrote:
Tue Jan 14, 2020 1:16 pm
You may want to seriously go back and study some market history you speak of.

There were many "paper millionaire retirees" in 1999-2000. For many, it didn't end well and some were forced to work additional years to recover from those losses.
Exactly. A very good friend of mine, at the peak of the market, exercised all his options, quit big tech, and retired. This netted him around $2M in company stock. Despite the fact that he had a financial advisor (who was incompetent in my opinion) he did not diversify, not even to make sure he could pay the taxes due from exercising the options. Guess what, a year later, he owed the IRS $600K+ and the price of the shares he had fell in half. There went the retirement. Granted, he bet the farm on one stock, because, well, it had never so much as lost a dime year over year during the 10 years he worked for them and remained the dominant firm in the business with no end in sight. This is just a more concentrated version of doing "tech". It works until it doesn't.
Last edited by almostretired1965 on Tue Jan 14, 2020 2:26 pm, edited 1 time in total.

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Re: Why not go all aggressive? The risk seems about the same....

Post by Schlabba » Tue Jan 14, 2020 2:25 pm

danielc wrote:
Tue Jan 14, 2020 2:13 pm
Schlabba wrote:
Tue Jan 14, 2020 12:09 pm
You run the risk of underperforming the stock market. If you own the stock market you will never loose to it.
I really don't get this view of risk. Why do you anchor against the stock market? Which stock market? The global one or the US one? (or some other stock market?).
In my case the global one because I am not a US based investor. You could measure your returns against the S&P500 if you like.

If you measure performance of what you are doing you have to compare it to the alternatives, right? You can only spend your money once. The money you allocate to a sector or factor fund you cannot put it in the total market index.
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Re: Why not go all aggressive? The risk seems about the same....

Post by rascott » Tue Jan 14, 2020 2:27 pm

Some of my current tech holdings

FBSOX (Fidelity Select IT services)
VGT
QQQ
TQQQ...yep


:sharebeer

Wish I had bought a lot more of all of them. Not really all that appealing at current levels however.
Last edited by rascott on Tue Jan 14, 2020 2:28 pm, edited 1 time in total.

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Re: Why not go all aggressive? The risk seems about the same....

Post by firebirdparts » Tue Jan 14, 2020 2:28 pm

CodeMaster wrote:
Tue Jan 14, 2020 11:50 am

I was wondering if anyone saw any real flaw in this theory or your thoughts on this strategy?
You'll be fine. Maybe someday you'll be comparing investment experience with somebody who invested in index funds, but it's very likely that neither one of you will know exactly what you made. Real investing is complicated, and after a couple of decades of putting money in multiple funds maybe even every payday, you really don't know how you would have done with somebody else's investments. You just know at the end you have a lot of money. Could you do better? I don't know. Maybe.

I had an experience that you can relate to. When I was younger, I didn't have much money, and 401k's were invented, so I started channelling into that, but we didn't have a "tech fund" and in fact without brokeragelink I still wouldn't to this day. I had basically no taxable money at all. I always wanted some "Fidelity Select Computers". You don't have to be too smart to know that is going to make a lot of money, and it did. I never got to enjoy my Fidelity Select Computers, because starting in y2K it lost 75% of its value. I also owned 100 shares of Apple in the early 1990's. I've always liked their products. I didn't get to enjoy that either, because they almost went bankrupt and I chickened out.
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Re: Why not go all aggressive? The risk seems about the same....

Post by Scooter57 » Tue Jan 14, 2020 2:32 pm

Aggressive growth shouldn't be limited to tech stocks. The PrimeCap Oddyssey Aggressive Growth Fund (POAGX) has a very good history but it spreads its aggressive investments over smaller companies in tech, healthcare, and a interesting companies with high potential in other niches. Right now a lot of tech is huge, mature companies, like AAPL and AMZN not the small companies that turn into huge wealthy companies in another ten or twenty years which used to be what Tech was all about.

I balance a very conservative investing strategy with a good chunk of POAGX. Historically when the market tanks it drops further than the S&P500 but it has also recovered more quickly, too.

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Re: Why not go all aggressive? The risk seems about the same....

Post by danielc » Tue Jan 14, 2020 2:35 pm

Schlabba wrote:
Tue Jan 14, 2020 2:25 pm
If you measure performance of what you are doing you have to compare it to the alternatives, right?
No, you don't. I don't. Comparing against what you could have done is optional. Sounds like a good way to be miserable. There will always be something else you could have done that would have been better than what you did.

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Re: Why not go all aggressive? The risk seems about the same....

Post by Taylor Larimore » Tue Jan 14, 2020 2:40 pm

Codemaster:

In March, 2000, at the peak of a long bull market, Mr Bogle and Mr. Cramer were keynote speakers in a Miami Herald Money Show.

Mr. Bogle was the first to speak. He warned the audience of the risk in stocks and the importance of diversifying with bonds.

Mr. Cramer was next on the podium. Mel and I were standing together in the back of the auditorium. We heard Mr. Cramer urge the audience to "write down the names of 10 (technology) stocks to buy now."

Fifteen months later, Money magazine reported that his list of 10 technology stocks had "cratered" 82 percent.

Lesson Learned: Don't try to beat the market by betting on market segments.

Best wishes.
Taylor
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Re: Why not go all aggressive? The risk seems about the same....

Post by watchnerd » Tue Jan 14, 2020 2:43 pm

danielc wrote:
Tue Jan 14, 2020 2:09 pm
watchnerd wrote:
Tue Jan 14, 2020 11:59 am
The elephant in the room: looming government regulation

Privacy laws could blow up the business models of Facebook, Twitter, Google.
And let's not forget that there is more than one government that could do that. Even if you think that the US govt is in the pocket of "big-tech" and will never enact privacy laws... can you say the same about the EU? The EU does seem to care a little about privacy.
GDPR is already in place in EU and multinationals are having to comply.

In Germany, CIOs can now be held personally liable (i.e. no shield of corporate protection) for compliance violations during their tenure, even if they're no longer employed by the company but it happened under their watch in the past.
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Re: Why not go all aggressive? The risk seems about the same....

Post by LiveSimple » Tue Jan 14, 2020 2:45 pm

rascott wrote:
Tue Jan 14, 2020 2:27 pm
Some of my current tech holdings

FBSOX (Fidelity Select IT services)
VGT
QQQ
TQQQ...yep


:sharebeer

Wish I had bought a lot more of all of them. Not really all that appealing at current levels however.
Some of my current tech holdings
FBSOX Fidelity Select IT services
FSCSX Fidelity Select Software and IT Services Portfolio
VGT Vanguard Information Technology
SOXX iShares PHLX Semiconductor ETF
IYW iShares U.S. Technology

We do have other tech funds, other than QQQ
Last edited by LiveSimple on Tue Jan 14, 2020 2:48 pm, edited 2 times in total.

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Re: Why not go all aggressive? The risk seems about the same....

Post by deltaneutral83 » Tue Jan 14, 2020 2:45 pm

I get nervous thinking about VTI being like 4% each for MSFT/AAPL, and that's inside a well diversified index fund. Cannot imagine being double and triple these %'s in my nest egg. Farming was 80% of the economy and then it wasn't.

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Re: Why not go all aggressive? The risk seems about the same....

Post by Schlabba » Tue Jan 14, 2020 2:52 pm

danielc wrote:
Tue Jan 14, 2020 2:35 pm
Schlabba wrote:
Tue Jan 14, 2020 2:25 pm
If you measure performance of what you are doing you have to compare it to the alternatives, right?
No, you don't. I don't. Comparing against what you could have done is optional. Sounds like a good way to be miserable. There will always be something else you could have done that would have been better than what you did.
So without comparing to the alternatives, you just use your gut-feeling to pick a sector of the stock market and hope it outperforms the rest of the stock market?
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Re: Why not go all aggressive? The risk seems about the same....

Post by watchnerd » Tue Jan 14, 2020 2:57 pm

As someone who has worked in the tech industry since 1995, and experienced the massive rate of change, seen winners become losers, and dogs get reborn, I'm going to say:

Yes, go all-in on tech!

Join the party!

My RSUs and ESPP would appreciate it.

And my wife wants a new kitchen.

[JK] :P
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Re: Why not go all aggressive? The risk seems about the same....

Post by danielc » Tue Jan 14, 2020 3:11 pm

Schlabba wrote:
Tue Jan 14, 2020 2:52 pm
So without comparing to the alternatives, you just use your gut-feeling to pick a sector of the stock market and hope it outperforms the rest of the stock market?
Ah, not exactly. I don't do sector weights. But I did choose my US vs non-US allocation, and I did choose to buy emerging market bonds. I tried to make these choices objectively, but the truth is that I can't possibly know whether the US vs ex-US ratio should be 70/30, 60/40, or 50/50. In a few years I will look back and probably discover that I didn't make the perfect choice. Maybe I should have bought more European stocks, or more emerging market bonds. For my US/ex-US ratio I chose 60/40 because that's what Vanguard does for investors in the US, but I often wonder if instead I should have the same ratio as the world portfolio. I don't know. So what I'm saying is that there's no use in looking back and discovering that there was something better you could have done. My plan is to make a reasonable portfolio with very few active decisions, and hope for the best.

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Re: Why not go all aggressive? The risk seems about the same....

Post by White Coat Investor » Tue Jan 14, 2020 6:07 pm

rascott wrote:
Tue Jan 14, 2020 2:08 pm
White Coat Investor wrote:
Tue Jan 14, 2020 11:54 am
Google "NASDAQ in 2000" or look at historical returns of QQQ.

Yep, there've been tremendous returns after all the fake tech companies with zero earnings (or even sales) were washed out of the market.
You might be too young, but that's pretty much what everyone said in the late 90s. Nobody has asked this question for 15 years now, but I bet we'll start getting it again now. And in a year or two, there will be books recommending a 10% allocation to tech and a 10% allocation to telecom again, just like in the late 1990s. And eventually, what has happened to tech (and large growth) before will happen again.

What you're saying is that the market is wrong right now and is undervaluing tech companies so you're going to put more of your money in tech than the average investor. Maybe you're right, maybe you're wrong, but if you do this, you'll find out over the next decade. Smells of recency bias to me though. Reminds me of everyone talking about how awesome small value stocks are back in 2003-2006. Not hearing that very much now. Investing styles come and go. I'd guess you've missed the boat on this tech run up, but my crystal ball is cloudy.

You make your bets and you takes your chances, but putting all your money into one sector or one corner of the market is a pretty good bet.
Given that majority of my portfolio is in tech funds, I have a nice share also of sp500, nasdaq, dow indexes and health indexes.

I was wondering if anyone saw any real flaw in this theory or your thoughts on this strategy?
Let's see....

Tech LG
S&P 500 LG
Nasdaq LG
Dow LG
Health LG

Nope. No flaw there. I can't see a problem at all. :) #recencybias
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Re: Why not go all aggressive? The risk seems about the same....

Post by watchnerd » Tue Jan 14, 2020 6:28 pm

rascott wrote:
Tue Jan 14, 2020 2:08 pm


Yep, there've been tremendous returns after all the fake tech companies with zero earnings (or even sales) were washed out of the market.
You mean like Uber and Lyft these days?
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Re: Why not go all aggressive? The risk seems about the same....

Post by watchnerd » Tue Jan 14, 2020 6:38 pm

White Coat Investor wrote:
Tue Jan 14, 2020 6:07 pm
Reminds me of everyone talking about how awesome small value stocks are back in 2003-2006. Not hearing that very much now. Investing styles come and go. I'd guess you've missed the boat on this tech run up, but my crystal ball is cloudy.
Having worked with venture capitalists for about 15 years, I think the general public under-estimates how much of investing trends into what is "fashionable" is driven by the marketing engines of the financial industry.

When I would do ride-alongs on trips to institutional investors who had an allocation to VC in their portfolios, it was surprising how much of the inflows for the fund were driven by what was perceived to be "cool" by trustees and advisors.

If it sounded like good cocktail party chatter, you had a better chance.

"Green crypto" is one of the shinier objects recently.

Or ESG investing now.
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Re: Why not go all aggressive? The risk seems about the same....

Post by rascott » Tue Jan 14, 2020 8:44 pm

watchnerd wrote:
Tue Jan 14, 2020 6:28 pm
rascott wrote:
Tue Jan 14, 2020 2:08 pm


Yep, there've been tremendous returns after all the fake tech companies with zero earnings (or even sales) were washed out of the market.
You mean like Uber and Lyft these days?

Don't think either have much of any representation in tech sector funds. The private equity markets squeezed most of the win from those. At least they have large revenue basis, and are real companies.

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Re: Why not go all aggressive? The risk seems about the same....

Post by rascott » Tue Jan 14, 2020 8:46 pm

watchnerd wrote:
Tue Jan 14, 2020 6:38 pm
White Coat Investor wrote:
Tue Jan 14, 2020 6:07 pm
Reminds me of everyone talking about how awesome small value stocks are back in 2003-2006. Not hearing that very much now. Investing styles come and go. I'd guess you've missed the boat on this tech run up, but my crystal ball is cloudy.
Having worked with venture capitalists for about 15 years, I think the general public under-estimates how much of investing trends into what is "fashionable" is driven by the marketing engines of the financial industry.

When I would do ride-alongs on trips to institutional investors who had an allocation to VC in their portfolios, it was surprising how much of the inflows for the fund were driven by what was perceived to be "cool" by trustees and advisors.

If it sounded like good cocktail party chatter, you had a better chance.

"Green crypto" is one of the shinier objects recently.

Or ESG investing now.

Very correct.... doesn't hurt to catch a ride on the hot thing for a while. ESG may have a big 2020.

Just can't bet the farm on any of these things.... but fun to ride along with a 10% allocation.

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Re: Why not go all aggressive? The risk seems about the same....

Post by rascott » Tue Jan 14, 2020 8:53 pm

White Coat Investor wrote:
Tue Jan 14, 2020 6:07 pm
rascott wrote:
Tue Jan 14, 2020 2:08 pm
White Coat Investor wrote:
Tue Jan 14, 2020 11:54 am
Google "NASDAQ in 2000" or look at historical returns of QQQ.

Yep, there've been tremendous returns after all the fake tech companies with zero earnings (or even sales) were washed out of the market.
You might be too young, but that's pretty much what everyone said in the late 90s. Nobody has asked this question for 15 years now, but I bet we'll start getting it again now. And in a year or two, there will be books recommending a 10% allocation to tech and a 10% allocation to telecom again, just like in the late 1990s. And eventually, what has happened to tech (and large growth) before will happen again.

What you're saying is that the market is wrong right now and is undervaluing tech companies so you're going to put more of your money in tech than the average investor. Maybe you're right, maybe you're wrong, but if you do this, you'll find out over the next decade. Smells of recency bias to me though. Reminds me of everyone talking about how awesome small value stocks are back in 2003-2006. Not hearing that very much now. Investing styles come and go. I'd guess you've missed the boat on this tech run up, but my crystal ball is cloudy.

You make your bets and you takes your chances, but putting all your money into one sector or one corner of the market is a pretty good bet.
Given that majority of my portfolio is in tech funds, I have a nice share also of sp500, nasdaq, dow indexes and health indexes.

I was wondering if anyone saw any real flaw in this theory or your thoughts on this strategy?
Let's see....

Tech LG
S&P 500 LG
Nasdaq LG
Dow LG
Health LG

Nope. No flaw there. I can't see a problem at all. :) #recencybias
I was just beginning to invest in the late 90s. First stock I ever owned was the Ebay IPO.... as a very early user of that site. I recall the experience (and exuberance) quite well.

I just don't see many parallels to today. Those were all pipe dream companies..... you put a .com behind your name and you were awarded a 10 figure market cap. Now tech firms are actually the backbone of the economy.... not just the idea that they one day would be. If they are going down..... so is everything else. And it's the only sector with true secular growth. If GDP can't get much above a 2% mark.... then secular growth remains only game in town.

That said, my tilt is small.... roughly 10% (on top of the tech tilt of the TSMI).. my SCV tilt is 3x higher.

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Re: Why not go all aggressive? The risk seems about the same....

Post by Ferdinand2014 » Tue Jan 14, 2020 10:28 pm

CodeMaster wrote:
Tue Jan 14, 2020 11:50 am
So Ive been investing mutual funds all my life and I was studying its history and thinking about past...

Say a person still had decades before they ever wanted to retire.

Im a big tech fund guy, its here to stay, its not some fund that may disappear, the world is centered on tech. Tech funds also perform the best long term wise, of course they crash the hardest during down times but thats all irrelevant I think if you buy and hold forever.

During a crash, all funds crash almost the same... tech fund or the "safe" 500 funds all crash hard, tech virtually just a litte more then the "safer" funds . So it seems virtually unnecessary to try to play it "safe" and one should diversify but not be afraid to go tech heavy expecting the ultimate end result long term returns to be greatest that way.

Given that majority of my portfolio is in tech funds, I have a nice share also of sp500, nasdaq, dow indexes and health indexes.

I was wondering if anyone saw any real flaw in this theory or your thoughts on this strategy?

Truly appreciate the tips! :sharebeer :beer
I would not consider the strategy you propose.
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Re: Why not go all aggressive? The risk seems about the same....

Post by watchnerd » Tue Jan 14, 2020 10:37 pm

rascott wrote:
Tue Jan 14, 2020 8:44 pm



Don't think either have much of any representation in tech sector funds. The private equity markets squeezed most of the win from those. At least they have large revenue basis, and are real companies.
Are they real companies when they're burning billions every year to stay afloat and having negative earnings in billions per year?

Or is that a zombie company?
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Re: Why not go all aggressive? The risk seems about the same....

Post by wolf359 » Tue Jan 14, 2020 11:05 pm

Janus Henderson Global Technology Fund was a famous tech fund in the 90's. It wasn't just another tech fund, but among the best of the best. $10K invested in it when it opened in 1997 was worth $93K by 2000. Then there was a tech crash. It took 17 years for it to recover its former highs. This was better than some of its peer funds, which closed and were never seen again. It's now worth $163K, but it was quite a wild ride. I would guess that most people bought in 2000 after it performed spectacularly, then lost their shirts when it crashed and never seemed to come back. Most would have sold rather than waiting two decades for recovery.

The risk is not the same.

Disclosure: In the 90's I had the same strategy you described. Most of my money was in actively traded tech funds and individual tech stocks. In the early 2000's, I had my head handed to me. The strategy worked for almost ten years before the bottom fell out. As far as I can tell, I averaged about 8% return for my market timing and active trading years (about a 20 year period). This was disappointing, because I had been up 20% or more year after year for almost ten years. Everybody's a genius during a bull market...

...Until they're not.

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Re: Why not go all aggressive? The risk seems about the same....

Post by DB2 » Wed Jan 15, 2020 1:04 pm

The reasons have been laid out why you want diversification and how dangerous it is to bet exclusively on one sector no matter how much of a "sure thing" it looks. Nisprius' Nasdaq example should not be taken lightly either.

While tech is the present and future, it's not to say it will be the best performing asset class from a return perspective depending on one's timeline. Automobiles are not going anywhere either and are a major sector, yet as a whole this industry has had less than great equity returns.

With all of that said, if you insist to take a bet, a 5-10% tilt toward tech from a balanced equity portfolio is the most I would consider (although I am not doing it).

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Re: Why not go all aggressive? The risk seems about the same....

Post by Phineas J. Whoopee » Wed Jan 15, 2020 4:06 pm

OP: Assuming CodeMaster refers to your profession, an investment largely in tech stocks compounds risk upon risk. You already rely on the tech industry for your salary and your healthcare. To rely mostly on it for your capital growth would be more risky for you than for the average person.

Naturally you can invest in whatever you please.

PJW

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Re: Why not go all aggressive? The risk seems about the same....

Post by CurlyDave » Thu Jan 16, 2020 8:50 am

CodeMaster wrote:
Tue Jan 14, 2020 11:50 am

...I was wondering if anyone saw any real flaw in this theory or your thoughts on this strategy?

Truly appreciate the tips! :sharebeer :beer
I am thinking along the same lines on tech as you are.

I like QQQ, and have been invested in it for the past 10 years instead of SPY or VOO. Results have been very nice.

Make no mistake, it is more volatile than an S&P 500 fund, but IMHO it is wrong to consider volatility the same as risk.

I have mentioned this in other threads, but you should consider placing trailing stops on part of your tech holdings. This is controversial, but I have a flame-proof suit :mrgreen: :mrgreen: , and I think that in a strongly rising market a trailing stop can substitute for a bond holding. I use about a 5% stop parameter for index funds, and 8% for individual stocks which I hold very few of.

I retired in 2007 and have a high risk tolerance.

Before I retired and switched to mostly index funds, I had what I considered a very nice individual stock selection routine. PM me if you are interested. Anyone with the name CodeMaster will be able to implement it.

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Re: Why not go all aggressive? The risk seems about the same....

Post by Call_Me_Op » Thu Jan 16, 2020 8:58 am

CodeMaster wrote:
Tue Jan 14, 2020 11:50 am
So Ive been investing mutual funds all my life and I was studying its history and thinking about past...

Say a person still had decades before they ever wanted to retire.

Im a big tech fund guy, its here to stay, its not some fund that may disappear, the world is centered on tech. Tech funds also perform the best long term wise, of course they crash the hardest during down times but thats all irrelevant I think if you buy and hold forever.

During a crash, all funds crash almost the same... tech fund or the "safe" 500 funds all crash hard, tech virtually just a litte more then the "safer" funds . So it seems virtually unnecessary to try to play it "safe" and one should diversify but not be afraid to go tech heavy expecting the ultimate end result long term returns to be greatest that way.

Given that majority of my portfolio is in tech funds, I have a nice share also of sp500, nasdaq, dow indexes and health indexes.

I was wondering if anyone saw any real flaw in this theory or your thoughts on this strategy?

Truly appreciate the tips! :sharebeer :beer
I get the sense you were not invested in tech stocks in 2000.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Why not go all aggressive? The risk seems about the same....

Post by North Texas Cajun » Thu Jan 16, 2020 9:55 am

rascott wrote:
Tue Jan 14, 2020 2:15 pm
Sure and pop in the numbers since 2003 and get a much different story. Everyone knows (or should know) the history of the internet/ tech bubble.... and it's basically totally irrelevant to what the industry looks like today.
If you believe that, then go ahead. But if you have read very much about financial fraud and stock market manipulation, then you might believe, as I do, that whole industries find ways around regulations. It is my opinion that the best way to mitigate the risk of financial fraud is to invest as broadly as one can.

You and others may believe that you are smart enough to sniff out financial fraud. Please realize that some brilliant minds, who spent 60 and 70 hours a week investigating companies in a single sector, got completely fooled. They were fooled by companies such as Enron, Worldcom, Sunbeam, Theranos, and others.

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