100% ALL IN on one stock. Safe??

[Gumby]

"It is always the practice of wise people to reserve something for tomorrow, without venturing all upon one cast." -- Sancho Panza, in Miguel de Cervantes's Don Quixote, 1605.

I'll see your Cervantes and raise you a Shakespeare:

"...I thank my fortune for it,
My ventures are not in one bottom trusted,
Nor to one place; nor is my whole estate
Upon the fortune of this present year."

Antonio

The Merchant of Venice
Act I, Scene 1 (~1596)

 

[Hamlet]

I would at least mention that it might be a good idea to diversify a little. He probably won’t listen, but I like to at least make a token effort to help people I know avoid catastrophic mistakes.

I can’t imagine a riskier stock to have 100% of your net worth in, TBH.

I actually made a bet ( for a beer ) with someone late last year that KHC would outperform TSLA over the next four years.

Starting value of TSLA at $1015
Starting value of KHC at $33.65

Ends Dec 2025

So far I am winning, although that can ( and has ) changed in a day with TSLA.

 

[Major Tom]

He might get lucky. Over time, TSLA's rapid growth might slow down, yet still become a gradual, steady earner. It's within the realms of possibility. Having said that, if I owned that much in one stock that had experienced such recent stellar growth, I would already have cashed out most of it and bought VTSAX.

Which is why all my stock holdings are in VTSAX, and I don't have multiple millions
I hope your friend doesn't have a rude awakening.

 

[pacergal]

All you can do, IF he asks, is explain why you feel diversification is better/safer or whatever you feel. Putting everything on one stock is pretty risky, I think.
You could guide him to bogleheads or any Jack Bogle books if you think he would investigate.
Otherwise, mind your own investments and just change the conversation if you want to maintain your friendship. He will sink or swim on his own.

 

[SecondCor521]

Another comment:

In your OP, you use the phrase "ALL IN" on one stock. If that is the phrasing your friend is using, then he is using a gambling term to refer to his investing activity. This is careless thinking - gambling and investing are two different activities with different terminology. If he is investing with a gambling mentality then he is susceptible to a number of logical fallacies due to this discrepancy - google "behavioral finance" and you'll probably find some books or web articles on the topic - and those fallacies will eventually cost him money.

 

[pb4uski]

Just be aware that his head is probably so full of recency bias that there is no way that he will listen.

 

[Major Tom]

Just be aware that his head is probably so full of recency bias that there is no way that he will listen.

+1

If/when TSLA suffers a precipitous drop (especially if it is a prolonged or permanent downturn), he'll either learn from it and turn into a wiser investor, or he'll use it as "evidence" that the stock market is a fool's game that is to be avoided at all costs. As pacergal said, he will either sink or swim on his own.

 

[ejman]

"It is always the practice of wise people to reserve something for tomorrow, without venturing all upon one cast." -- Sancho Panza, in Miguel de Cervantes's Don Quixote, 1605.





I'll see your Cervantes and raise you a Shakespeare:

"...I thank my fortune for it,
My ventures are not in one bottom trusted,
Nor to one place; nor is my whole estate
Upon the fortune of this present year."

Antonio

The Merchant of Venice
Act I, Scene 1 (~1596)

It's unusual for Spanish to be more concise than English but in this case I have to give the win to Cervantes

 

[bend]

I read a book recently, which I am now forgetting the name, about how to express your viewpoint to someone and have productive dialogue. The crux of it was to hear the person out then say "I can see the merits of your position but also lets see if we can meet in the middle. Are you open to changing your mind?"


This podcast has a good rundown of this topic.

https://freakonomics.com/podcast/how-to-change-your-mind/

 

[CRLLS]

I often had "the talk" with a close friend. He worked at X, had his pension at X and purchased stock in X. I warned him several times about the "perfect storm" as I called it risk, but X was outpacing the general market. Tough to convince him. He eventually saw the light and changed his investments. Shortly thereafter the place went downhill, the raiders came in and stripped it for all it was worth. He then lost his job. Sad events.

Unless you are often discussing finance and investments, keep mentioning the risk. If not, then keep your mouth shut and hope for the best.

 

[corn18]

I read a book recently, which I am now forgetting the name, about how to express your viewpoint to someone and have productive dialogue. The crux of it was to hear the person out then say "I can see the merits of your position but also lets see if we can meet in the middle. Are you open to changing your mind?"


This podcast has a good rundown of this topic.

https://freakonomics.com/podcast/how-to-change-your-mind/

My best friends both use the same financial advisor and he did very well by them. I have talked to him several times and still get his newsletter where he outlines his investments. I have tracked them for 3 years now (he is new). If I had gone with him when my friends did, I would have 6x what I have now. He rode the mega growth trend to great wealth. He could do no wrong in their eyes. The way I talked to them about my boring index approach was I praised their growth. I was truly happy for them. I also explained that I don't want to go with this advisor until I see how he does in a downturn.

Well, Jan of 2021 hit him hard and they lost a lot of money. They were down 30% last year while I was up 20%. They talk to me more now. I still talk to their advisor and he is changing his approach. I'll keep an eye on him. I have told my wife to go with him if I die and she wants someone else to manage her money.

 

[NW-Bound]

My best friends both use the same financial advisor and he did very well by them. I have talked to him several times and still get his newsletter where he outlines his investments. I have tracked them for 3 years now (he is new). If I had gone with him when my friends did, I would have 6x what I have now. He rode the mega growth trend to great wealth. He could do no wrong in their eyes. The way I talked to them about my boring index approach was I praised their growth. I was truly happy for them. I also explained that I don't want to go with this advisor until I see how he does in a downturn.

Well, Jan of 2021 hit him hard and they lost a lot of money. They were down 30% last year while I was up 20%. They talk to me more now. I still talk to their advisor and he is changing his approach. I'll keep an eye on him. I have told my wife to go with him if I die and she wants someone else to manage her money.

Long-time forum members know that I am an active investor who buys mostly individual stocks. I use no advisors.

But I have told my wife that if she survives me, sell everything and put 50/50 in Wellesley/Wellington. She won't get rich but will not eat cat food by trusting these MFs with our money.

These MFs will not buy and have never bought IPOs, companies with stratospheric P/E, companies with only promises and no sales, stocks that go to the moon, meme stocks, and such silly things.

 

[kgtest]

What does your friend plan to do if Elon Musk has a stroke next year?

Precisely the reason I didn't go all in on TSLA. I considered it, discussed it with some very smart people around me, and this fact you state above was the collective reason why its a terrible idea and would be a big risk.

IF you have won the bet already, sell and diversify. Its like that old lady with one knee on the chair at the slot machine...she might have dialed in the 777 one out of 100 trips she has been to the casino on that specific machine, but kneeling around until you hit 777 a second time seems like a losing proposition.

BUT, I've tried to give MULTIPLE friends advice, whom have never taken it and have learned "the hard way". So keep that in mind as well. Surely someday you will be saying "I told you so."

 

[REWahoo]

But I have told my wife that if she survives me, sell everything and put 50/50 in Wellesley/Wellington. She won't get rich but will not eat cat food by trusting these MFs with our money.

Same here, and to aid her in getting there I already have 60+% of our portfolio in those two funds. I don't have the stomach for what you accurately describe as "...IPOs, companies with stratospheric P/E, companies with only promises and no sales, stocks that go to the moon, meme stocks, and such silly things."

 

[Running_Man]

The surest road to fantastic wealth is to concentrate your investment in one area that you are confident in and ride that investment. It is also without a doubt the highest risk and very subject to 100% loss.

I have seen both sides, I talked a friend who was 100% in Mobil stock in the late 70's and early 80's to sell 75 % into mutual funds because of lack of diversity. By 1995 he estimated I had cost him 10 million dollars. The stock went from about 15 to 110 risk adjusted paying a 3-7 percent dividend along the way.

My sister on the other hand did not listen to me and lost 1 million dollars at age 50 on COMDISCO stock where she also worked and had all her savings invested turning 50K into 1 million. They went bankrupt.

Neither one ever wanted to hear my opinion on stocks and investing after the fact.

In 2007 I advised Old Shooter on this forum to not hold 100% of his retirement funds in Bank of America because the dividend was extremely risky though he loved the idea on living on it's 5% yield and the stock then at 54 I had falling to 12 in the coming years due to the housing crisis I forsaw. It fell to 5 and Old Shooter's retirement was seriously impaired.

TSLA is the Microsoft of today. Anyone should know a 100% investment in a single company is the riskiest while being the highest rewarding potential way to invest. It is the single most achievable way to earn life changing amounts of money, in both directions.

 

[kgtest]

I'll see your Cervantes and raise you a Shakespeare:

"...I thank my fortune for it,
My ventures are not in one bottom trusted,
Nor to one place; nor is my whole estate
Upon the fortune of this present year."

Antonio

The Merchant of Venice
Act I, Scene 1 (~1596)

I'll see both your Cervantes and Shakespeare and raise you to biblical proportions with


"Cast your bread upon the waters, for after many days you will find it again.

Divide your portion among seven, or even eight, for you do not know what disaster may befall the land.

If the clouds are full, they will pour out rain upon the earth; whether a tree falls to the south or to the north, in the place where it falls, there it will lie."

Solomon (debated as to if he wrote this) - Ecclesiastes 11 (Old Testament), mid-10th century bc

 

[REWahoo]

As a guy raised in a small town who graduated from a cow college, I see all the above as fancy ways to say, "Don't put all your eggs in one basket".

 

[Gumby]

Seems that wise people have known what to do for a pretty long time.

 

[pb4uski]

As a guy raised in a small town who graduated from a cow college, I see all the above as fancy ways to say, "Don't put all your eggs in one basket".

... While it is fine to have a bullish investment hypothesis on TSLA, at the same time it is hazardous to put all your eggs in one basket. ...

Is there an echo in here?

 

[REWahoo]

Seems that wise people have known what to do for a pretty long time.

+1

Is there an echo in here?

Obviously yes, from Cervantes, Shakespeare and the Bible.

 

[CoolRich59]

Another wise man:

“Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.” ― The Richest Man in Babylon

 

[NW-Bound]

And then, there are guys like this Brit who bet it all on red in a roulette in Las Vegas, doubled his money, then called it quit.

Just doubling one's money would not be life-changing though. The guy doubled his $135K to $270K, which would not be enough to retire on.

And if you had $10M and walked away with $20M, would it change your life much? Of course, your life would really change if you walked away with empty pockets.

For the full story, see: https://www.chron.com/news/nation-w...-all-that-he-owns-and-bets-on-red-1972549.php

April 12, 2004 - LAS VEGAS -- A British man who sold all his possessions, including his clothes, stood in a rented tuxedo Sunday surrounded by family and friends and bet everything on a single spin of the roulette wheel.

He won't go home empty handed.

Ashley Revell, a 32-year-old Londoner, sold all his possessions in March, took $135,300 to the Plaza Hotel in Las Vegas, did some low-stakes gambling and then placed everything he had left on "red."

The wheel was spun, a crowd of supporters including his Mum and Dad from London went wild, the ball bobbled over the slots and landed on Red 7 -- and Revell walked away with $270,600.

"It all happened so quickly, it was spinning before I knew it," Revell said, adding he did not intend to try to double it again. He gave a $600 tip to the croupier and plans to party -- and buy some clothes.

 

[Dtail]

Wouldn't say a word and then continue in your friendship.

 

[aja8888]

I love reading these kind of threads as it makes me continue to take caution with my retirement stash.

At 78 years old, I have had two close friends suffer debilitating strokes in the last year. One guy was my weekly golf partner, the other a ROMEO group member who was in excellent physical shape at 81 years old. My golf partner is currently in assisted living at $8 k/month and he is 90% blind from the effects of the stroke. To top it off (besides being totally paralyzed on his left side), he got Covid last week and is now back in the hospital for 10 days.

What a wake up call for me and my other close friends. Money isn't everything, and one day, out of the blue, you can be in a wheelchair, or worse.

Another thing that is becoming obvious is that once you retire, you can't make the money back if you lose it, or even a big portion of it.

Most of my retired friends use an FA and are happy, since, of course, the last several years have been good. We don't talk about finances as we just try to have good times together.

 

[Hamlet]

My sister on the other hand did not listen to me and lost 1 million dollars at age 50 on COMDISCO stock where she also worked and had all her savings invested turning 50K into 1 million. They went bankrupt.

My first job out of college was at Comdisco. I actually met the CEO Nicholas Pontikes once when he came to visit our office. He was the son of the founder and managed to destroy a nice solid business by chasing every stupid technology fad of the time. My impression of him was that he was an absolute tool.