First bullet point I found when I looked up ARKK.
"Cathie Wood's Ark Invest has destroyed $14 billion in wealth over the past decade."
I guess I don't need to know more.
What is the minimum size (percentage) holding that is worthwhile?
- Thread starter rayvt
- Start date
First bullet point I found when I looked up ARKK.
"Cathie Wood's Ark Invest has destroyed $14 billion in wealth over the past decade."
I guess I don't need to know more.
Al18
Full time employment: Posting here.
It's hard to avoid NVDA. If you own an SP500 fund, you probably own 10 times as much NVDA stock today, compared to 2 years ago.
WhenIsItTime
Recycles dryer sheets
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I'm curious why you say this? 2% at $10k is OK, but 2% at $40k is not OK. If we assume each portfolio supports a respective ~X (i.e. 4) % withdrawal rate, wouldn't the risk be equal?
As discussed above with this acknowledging market weight concentrations at the top of index funds, small individual holdings could be a way to diversify.
How did it get this way? Were these larger % of portfolio positions that haven't done as well? Were you scratching the itch on the market can be legalized gambling?
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
You've likely shared already (and, sorry, I've forgotten) what is your alternative to stocks? Cash at interest? Lately, that's not so bad a strategy. But for several years, it would have lost vs inflation. I don't really like the stock market, but by keeping my AA at 1/3 or so, I figure the potential gain is worth the potential loss. Just the fool-hardy gambler in me, I guess.YMMV
I do what the academics recommend, which is to hold "the market portfolio." Everything. VTWAX/Vanguard Total World Stock Index Fund. It's hard to get more diversified than owning everything.
So sitting the bubbles out involves for me just not worrying about that froth. It is always in the market portfolio, bubbling away, coming and going. Nothing I can do about that. But from history I know that one-decision stocks, the nifty fifty, the internet bubble, etc. all come and go and are thus best ignored.
People have tried to do more. Maybe ten years ago there was a concept called "enhanced indexing." The idea was that the managers didn't claim to be able to pick the winners but felt that they could pluck a few future losers out of the portfolio and thus get "enhanced" performance. I'm sure some tried to remove bubble stocks as well as just poor performers. I haven't heard of the concept in years, so it probably didn't work any better than any of the other stock-picking schemes that have come and gone. So I don't try to enhance my index by omitting bubbly stocks like Nvidia.
More recently there are the "equal-weighted" index funds. These are intellectually attractive because they avoid situations where just a few stocks drive the value of the index, but as a practical matter they don't seem to have worked out. Why? I don't know -- maybe the cost of managing such a fund is a factor. But regardless, it's still VTWAX for me.
There are strong arguments that by far the best approximation to stock prices and the market is a random process. No one can predict random but random does predict bubbles. and busts.
Burton Malkiel " ... The indexing strategy is the one I recommend most highly. At least the core of every portfolio ought to be indexed. I recognize, however, that telling most investors that there is no hope of beating the averages is like telling a six year old that there is no Santa Claus. It takes the zing out of life."
With zero dollar commissions, I think any size position is fine and can be worthwhile. Especially if you want to spread out your risk. The only way to beat the index is to hold fewer concentrated positions, but if you build out smaller positions slowly over time you will have some relative winners and losers and likely be somewhat close in performance to some index. So in that aspect owning a broad index may make more sense if one plans on keeping a lot of smaller positions. It depends on how involved one wants to be.
I think smaller positions are especially suited when investing for income in slower growth companies. For example I would rather own 2-4 utilities than pool all that investment into a single one. Similar if I was looking to buy a consumer staple, REIT, bank, insurance, defense/military, etc. As no amount of up front research will tell you which are the best long term investments; even if you might be able to strategically buy overall (assuming you are top of things and your timing is good).
I think smaller positions are especially suited when investing for income in slower growth companies. For example I would rather own 2-4 utilities than pool all that investment into a single one. Similar if I was looking to buy a consumer staple, REIT, bank, insurance, defense/military, etc. As no amount of up front research will tell you which are the best long term investments; even if you might be able to strategically buy overall (assuming you are top of things and your timing is good).
TheWizard
Thinks s/he gets paid by the post
Well, sort of.
You can do just as well with $5M in the s&p 500 as in TSM...
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TheWizard
Thinks s/he gets paid by the post
If you want more, I would recommend Vanguard's MGK ETF...
Some were tag ends of a holding that was sold. Getting a DRIP position when selling all the shares after the ex-dividend date but before the pay date.
Some were wanting to buy into a new position without selling anything, just using cash that had accumulated in the account.
As others have noted, stock allocation/weighting may be relative to how much money you have to invest or you can afford to invest. I've been a dividend investor mostly over the last 10-15 years and am a bit younger, still working. Own a bunch of inidividual stock and several ETFs now, with position allocation from 5% down to .01% of the stock portfolio.....why ~ .01%? Because we keep most the spin-off companies that occur and are sometimes small or minute. We used to be heavily in CDs and a minority in individual stocks and ETFs, but that flip-flopped over time. There could be moderate to considerable tax consequences for keeping in CDs vs dividends, but you have to live with much larger volatility, and if its true, its probably a 'good problem' for you(if worring about that you're probably relatively wealthy).
On top of possible less fees, one thing I like about inidividual stocks is the added control to buy and sell the stock individually as opposed to ETFs and index funds.
I think weighting is very important and something I've learned through getting burned without it - buying too much at once. However, as far as allocation weighting, also don't let a smaller weight stop you from purchasing. Very Rare Example, I'd bought a smaller weight of NVDA before its current meteoric rise and it has helped buoy other weaker or negative stocks (currently at least). I also acknowledge going overboard on allocation that has not gone well. Since the transaction fees have come down so have the timeconsiderably, buying in smallish chunks and more frequently might be better (if you have the time or enjoy it or both) . Stocks that appear riskier I intentionally buy/keep less shares generally. It helps insulate from price downward air-gaps. Great recent air-gap example, have had NYBC (unfortunately now) but bought in with a smallish amount over time so the burn is relatively small compared to whole portfolio. Hurts getting hammered down due to management high-risk taking, but you gotta know what you're getting into. As noted some call these speculatory buys - I'll limit down to relative low allocations. NYBC was a speculatory stock.... A couple of speculatory stocks I've more recently bought include FL and VFC. I wouldn't fault anyone for not buying on speculation.
You never know what will happen. On allocation risk, price entry point heavily matters too, and stability cannot be assumed. One of our worst buys was an REIT that looked stable over a decade from about 2011 to 2019, then the pandemic hit (kind of quickly over a few months as I recall) and the stock air-gapped with most everything else in March 2020. I'd bought it in early 2019 and it lost 3/4 of its value in a few trading days. At the time I'd thought buying 2 or 3% allocation of whole portfolio was ok, and maybe for someone else its no problem. The stock (now SVC) cut out its dividend.....I've held it since, the dividend was reinstated more recently, but the stock never recovered to its 2019 level. Looking back it had a great looking track record, but you cannot base it on that. As mentioned, still working, so I'm ok with the volatility, but have thought about selling and getting back to more conservative mix of investments. If we were semi-retired or retired, I'd certainly flip allocations some amount. I found I enjoy investing and spending time with it so there's that too to consider - if you don't like investing, stick to ETFs as your higer risk or just fixed which is what my work mentor did when he retired.
On top of possible less fees, one thing I like about inidividual stocks is the added control to buy and sell the stock individually as opposed to ETFs and index funds.
I think weighting is very important and something I've learned through getting burned without it - buying too much at once. However, as far as allocation weighting, also don't let a smaller weight stop you from purchasing. Very Rare Example, I'd bought a smaller weight of NVDA before its current meteoric rise and it has helped buoy other weaker or negative stocks (currently at least). I also acknowledge going overboard on allocation that has not gone well. Since the transaction fees have come down so have the timeconsiderably, buying in smallish chunks and more frequently might be better (if you have the time or enjoy it or both) . Stocks that appear riskier I intentionally buy/keep less shares generally. It helps insulate from price downward air-gaps. Great recent air-gap example, have had NYBC (unfortunately now) but bought in with a smallish amount over time so the burn is relatively small compared to whole portfolio. Hurts getting hammered down due to management high-risk taking, but you gotta know what you're getting into. As noted some call these speculatory buys - I'll limit down to relative low allocations. NYBC was a speculatory stock.... A couple of speculatory stocks I've more recently bought include FL and VFC. I wouldn't fault anyone for not buying on speculation.
You never know what will happen. On allocation risk, price entry point heavily matters too, and stability cannot be assumed. One of our worst buys was an REIT that looked stable over a decade from about 2011 to 2019, then the pandemic hit (kind of quickly over a few months as I recall) and the stock air-gapped with most everything else in March 2020. I'd bought it in early 2019 and it lost 3/4 of its value in a few trading days. At the time I'd thought buying 2 or 3% allocation of whole portfolio was ok, and maybe for someone else its no problem. The stock (now SVC) cut out its dividend.....I've held it since, the dividend was reinstated more recently, but the stock never recovered to its 2019 level. Looking back it had a great looking track record, but you cannot base it on that. As mentioned, still working, so I'm ok with the volatility, but have thought about selling and getting back to more conservative mix of investments. If we were semi-retired or retired, I'd certainly flip allocations some amount. I found I enjoy investing and spending time with it so there's that too to consider - if you don't like investing, stick to ETFs as your higer risk or just fixed which is what my work mentor did when he retired.
mathjak107
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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- Jul 27, 2005
- Messages
- 6,208
the flip side of missing bubbles is few actually can consistently not only miss the worst days but they can’t even reliably miss the worst time frames .
so they end up missing the best days .
investors who try to time don’t realize how few best days we have .
these best days if missed have a forever effect on future compounding.
University of Michigan Professor H. Nejat Seyhun analyzed 7,802 trading days for the 31 years from 1963 to 1993 and concluded that just 90 days generated 95% of all the years’ market gains — an average of just three days per year. miss those few days and you hurt your return .
If you were able to miss the worst days , you would have had an incredible return .
But It is near impossible to not only reliably miss the worst days but it is just as hard to miss the worst time frame as a whole .
catching the best days is easy as pie ... just be invested . NO PREDICTING NEEDED .
but it grows worse when you miss those best days which are so few
Here's how a $10,000 initial investment fared over the past 20 years depending on if its investor stayed invested or instead, missed some of the market's best days.
January 4, 1999 to December 31, 2018
Dollar value. Annualized Performance
Fully invested (S&P 500 index). $29,845 5.62%
Missed 10 best day $14,895. 2.01%
Missed 20 best days $9,359. minus - . 33%
Missed 30 best day. $6,213 minus -2.35%
Missed 40 best days $4,241 minus -4.2%
Missed 50 best days $2,985. minus -5.87%
Missed 60 best day $2,144 minus -7.41%
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Talking about missing individual days is meaningless from a practical standpoint. There is no way to know when to hold or not hold individual days. Also, as many have pointed out, the best and worst days come in together in clusters. A best day will be close to a worst day, and vice-versa.
From an actionable standpoint, we would like to be IN during a time period when there are more good days than bad days, and to be OUT during a time period when there are more bad days than good days.
I have a spreadsheet with the weekly historical data of the S&P 500 from 1/1/1950 to 10/22/2021.
The growth (including dividends) of $100 grows to $248,360 for buy-and-hold.
11.5% CAGR
Using the 43 week (200 days) SMA signal, $100 grows to $98,406.
10.1% CAGR
93 trades (buys + sells)
When in: 13.1%
When out: 5.9%
Showing that while this timing captured many of the gains during the good times, it also missed many of the gains during the bad times.
Better maximum drawdown and Sortino ratio, though.
Using the Growth Trend Timing version of the 43 week SMA, $100 grows to $195,637
11.2% CAGR
49 trades (buys + sells)
When in: 13.0%
When out: 1.9%
Showing that this timing captured many of the gains during the good times, it missed very few of the gains during the bad times.
From an actionable standpoint, we would like to be IN during a time period when there are more good days than bad days, and to be OUT during a time period when there are more bad days than good days.
I have a spreadsheet with the weekly historical data of the S&P 500 from 1/1/1950 to 10/22/2021.
The growth (including dividends) of $100 grows to $248,360 for buy-and-hold.
11.5% CAGR
Using the 43 week (200 days) SMA signal, $100 grows to $98,406.
10.1% CAGR
93 trades (buys + sells)
When in: 13.1%
When out: 5.9%
Showing that while this timing captured many of the gains during the good times, it also missed many of the gains during the bad times.
Better maximum drawdown and Sortino ratio, though.
Using the Growth Trend Timing version of the 43 week SMA, $100 grows to $195,637
11.2% CAGR
49 trades (buys + sells)
When in: 13.0%
When out: 1.9%
Showing that this timing captured many of the gains during the good times, it missed very few of the gains during the bad times.
My number was always 4% and unlimited with Total Stock Market Funds, although I do split between VTI and VOO. I was never very much of a stock buyer, I have probably lost more than I made picking stocks. I only have a few High dividend REITS left and when I sell those I'll be done with individual stocks. Retired 6 years, simplifying finances, so when I'm gone it will be easier for my wife, (or the kids to help her). She has never paid attention to our finances, (other than being very frugal), she should but she hasn't.
Running_Man
Thinks s/he gets paid by the post
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- Messages
- 2,844
There is no minimum size Warren Buffet owns stocks that represent less than 1 1/100th of a percent of the total holdings of Berkshire Hathaway.
The Magnificent 7 (except for Tesla) are all legitimately profitable with either pricing power or reliable revenue streams. This not like the pets.com/webvan type DotCom Bubble where most companies got chewed up by competition and never had any path to profitability. If you look closely at the Magnificent 7 they have common cultures, internally they are notoriously cheap (but you don't see this unless you work there) and frugal, they hire and fire at a moment's notice in order to develop products or cut costs, they are willing to spend money on pay packages for talent but only for talent, not for the sake of headcount.
Tesla is the outlier. They have huge sunk costs to keep factories running, they spend zero on marketing/advertising, they are cutting prices which is never a good indicator of future profits, their product quality does not match their perceived cachet, the CEO is continuously alienating future customer bases (young people, progressive-minded people, et. al.) and they appear to have no path to sustained profitability. In a world where their car business detonates (which it very well can once they burn through enough cash) the one asset they have of huge value is their Supercharger network which is in a sector of huge deficiency in the marketplace. EV will always be constrained by woefully inadequate infrastructure until someone or something steps in to relieve that gap.
Like you, I don't see a market bubble. There is too much existing underlying demand and profit already in place.
