100% ALL IN on one stock. Safe??

[accountingsucks]

Just curious but would anyone say something to a friend of yours in terms of risk management. He is 100% TSLA since $150 share price and is semi retired at the age of 40 with about $2.5Million....a mix of shares and LEAPs all in TSLA....or should I just mind my own business? We have discussed stocks/investing in general and when I mention my 30% mix of bonds he doesn't understand their purpose. Nor does he understand my index only approach to equities due to their "slow growth" He sees $4000 TSLA as a "no brainer" by 2030 with 10 million cars sold then. That would be what a $5Billion market cap

I mean anything is possible but that would mean 1 out of 6 cars sold at that time is a TSLA. Then of course there is mention of the TSLA bot (currently just a man in a robot suit), insurance products, robotaxis (no way this would ever be regulated), and solar (currently a low margin money losing segment). Just keep my lips shut right? I have seen this before with some other people/stocks and it was financially ruinous...quite tragic, older people with kids who threw away decades of savings due to poor risk management.

 

[chassis]

So you have the answer to your question, correct? It's the summary of your second paragraph. Agree?

 

[luckydude]

Just curious but would anyone say something to a friend of yours in terms of risk management. He is 100% TSLA since $150 share price and is semi retired at the age of 40 with about $2.5Million....a mix of shares and LEAPs all in TSLA....or should I just mind my own business? We have discussed stocks/investing in general and when I mention my 30% mix of bonds he doesn't understand their purpose. Nor does he understand my index only approach to equities due to their "slow growth" He sees $4000 TSLA as a "no brainer" by 2030 with 10 million cars sold then. That would be what a $5Billion market cap

I mean anything is possible but that would mean 1 out of 6 cars sold at that time is a TSLA. Then of course there is mention of the TSLA bot (currently just a man in a robot suit), insurance products, robotaxis (no way this would ever be regulated), and solar (currently a low margin money losing segment). Just keep my lips shut right? I have seen this before with some other people/stocks and it was financially ruinous...quite tragic, older people with kids who threw away decades of savings due to poor risk management.

I would say nothing. It's your friend's money and he can do as he pleases. Maybe he becomes a billionaire or maybe he goes broke. His life. His choice.

 

[MRG]

I hold Tesla and wish I had bought more but diversification is a good idea. Just like I sold off some of the Apple I bought 10 years ago it's good to diverify. Your not likely to get anywhere with a fanboy so I wouldn't try past giving him some great examples.

 

[Al18]

It’s like someone who invested in GM, Dodge, Sears, Kmart, etc. They’ve all gone bankrupt.

 

[NW-Bound]

... He sees $4000 TSLA as a "no brainer" by 2030 with 10 million cars sold then. That would be what a $5Billion market cap

You meant $5 trillion market cap.

For a perspective, the total value of all US companies is $50 trillion.

$5 trillion is Apple and Microsoft combined. Can Tesla grow that big? I dunno. A lot of weird things happen in life, so you cannot rule anything out.

I just don't want to bet all on any single thing, whatever it is. And I never bought any Tesla share. But then, I have never bought a single share of Apple, Google, Microsoft, Netflix, Facebook, etc... I keep missing out on these hot names, and somehow I still have many $M. Just lucky, I guess.

People are free to do whatever they want with their money as long as it is legal. I just would not say anything.

 

[SecondCor521]

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

 

[captain3d]

If he is right you are wrong. If he is wrong he does need to talk to you any more.

Now you know the facts about his investing you are already in this problem situation.

Good luck.

 

[luckydude]

I knew a guy back in the late 90s who worked as a desk grunt. He bought a few hot internet stocks on the cheap and eventually accumulated a million. Everyone in the office knew about him and he became a sort of celebrity in the office. People would walk past his desk and whisper to each other, "that's the guy with a million!"

He had won the game and could've cashed out at least some of the chips to lock in his winnings. But he believed in his own investment acumen and kept playing and when the dotcom turned into dotbomb, he ended up with 0.

In some ways, it's easier to get lucky with a stock (and it has been pretty easy the last few years). It's harder to have the self-discipline and self-awareness to cash in the winnings and walk away.

 

[FLSUnFIRE]

As TSLA market value grows, I will increase my holdings (via VTSAX). Currently about 1.18%, I'm pretty heavy in Apple and MS as combined they make up almost 10% (as I sit here on my rapidly aging PC with my iPhone next to me)... no Tesla in the garage.


Actually, I'm a bit less as I do have a fair amount in Small Cap Indexes as well.


I wouldn't be comfortable 100% in any stock. I don't really buy individual equities anymore but when I did, I was a value investor and did my own DCF analysis and set a price I was willing to pay (usually expected annual return of 15% was my lowest acceptable if I loved the stock). I did well picking but selling that baby that just rocketed up is hard and I rode a few down. The last time I bought an individual stock, my rule was to sell 1/2 when it doubled and if I still liked it could hold the rest and not kick myself for riding it down... it quadrupled after and I had more regret!


I wouldn't comment, I don't think it would do any good... be friendly... he may be a trillionaire one day and invite you out on one of his Tesla powered yachts.

 

[iloveyoga]

Nobody listens to me when I share my views on diversification. I saw what happens first hand working with retirement plans.

 

[Aerides]

I never talk detailed finances with friends. Stay out of it. Enjoy your friendship but talk about other things.

 

[folivier]

I like to remember back in the days when Enron was flying high. The company that owned us was trying hard to beat Enron. I remember our COE saying in a meeting "we'll be #1 at all costs". I leaned over to the guy next to me and said "we're sci*wed."
My manager was all in on our company stock as were lots of employees. I only held what was given as a 401k match. My manager would always say when he hits a million he'll retire. Fast forward a few months later and the stock tanked, he was a few thousand short of his million. Everyone started dumping their stock. I bought more and everyone thought I was dumb. But here I am comfortably retired.
Doesn't answer the OP's question but does offer an anecdote.

 

[Car-Guy]

Shocking... At least he's not "shorting" it.


Seriously, any single stock risk is to great and 2.5m at ~40 ain't enough to retire on, IMO. Sounds like you have done what you can and still be friends.

 

[OverThinkMuch]

"Yup, Tesla, lucky break. You think we're going to get rain tomorrow?"

I've seen a Tesla thread elsewhere go back and forth. People who bought at $140 are not investors who happened to find 100% confidence in Tesla. They are die hard Tesla fans who bought only Tesla stock. You won't convince them to change, even if you try.

 

[MRG]

I never talk detailed finances with friends. Stay out of it. Enjoy your friendship but talk about other things.

+120000

That's how many dollars I lost from concentration in my 401k! One hot stock that was 2% of the fund later was over 50% of the fund before the feds moved in and shut down the hot stock! Whoops.

 

[Gumby]

I don't believe I have discussed specific investments with any of my friends.

 

[corn18]

I tell everyone who will listen how I am invested. If they choose to tell me their investments, I listen and offer no advice. I just tell them why I do what I do and make no judgement on their plans. Most of them are paying someone 1%-2% AUM fees, so they want to feel good about spending that much money on something I do for myself. I do like talking finances with my friends, we just avoid talking about what we invest in. We focus more on how much we need to retire, rich/broke/dead, SS strategies and the like.

I will say that I believe there are more people that retire comfortably using the tried and true LBYM and and boglehead investing than those that pick a single stock (or crypto) and ride it to FIRE. The hubris of a lucky pick is usually their downfall.

 

[pb4uski]

Just curious but would anyone say something to a friend of yours in terms of risk management. He is 100% TSLA since $150 share price and is semi retired at the age of 40 with about $2.5Million....a mix of shares and LEAPs all in TSLA....or should I just mind my own business? We have discussed stocks/investing in general and when I mention my 30% mix of bonds he doesn't understand their purpose. Nor does he understand my index only approach to equities due to their "slow growth" He sees $4000 TSLA as a "no brainer" by 2030 with 10 million cars sold then. That would be what a $5Billion market cap

I mean anything is possible but that would mean 1 out of 6 cars sold at that time is a TSLA. Then of course there is mention of the TSLA bot (currently just a man in a robot suit), insurance products, robotaxis (no way this would ever be regulated), and solar (currently a low margin money losing segment). Just keep my lips shut right? I have seen this before with some other people/stocks and it was financially ruinous...quite tragic, older people with kids who threw away decades of savings due to poor risk management.

100% ALL IN on one stock. Safe?? Absolutely NOT.

I would frame it differently... more as a question... doesn't having 100% TSLA result in significant concentration risk for your life savings and financial future?

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.

He could harvest some of his TSLA gains to buy long-term protective puts in case the worst happens.... plan for the best but prepare for the worst. Or sell TSLA and invest in a more balanced portfolio and carve out what he doesn't need to assure his financial future and buy LEAP calls on TSLA.

But at the end of the day it is his money and if he choses to bet it all on TSLA then it is a free country.

 

[ExFlyBoy5]

I don't believe I have discussed specific investments with any of my friends.

Smart idea. IMHO those that won't stop going on about TSLA (or 'stonks' trading) can't be talked to rationally. It's a cult mentality...again, just my opinion.

 

[pb4uski]

Smart idea. IMHO those that won't stop going on about TSLA (or 'stonks' trading) can't be talked to rationally. It's a cult mentality...again, just my opinion.

Yup... like the crypto-maniacs.

 

[Zathras]

I wouldn’t even mention Tesla, but you might want to mention Black Swan events.
Framing the discussion as mitigation strategies in general, might work better.

TSLA makes up a lot of my portfolio, but not 100%. 100% in any one investment is far more risk than I want to accept, even in something as solid as TSLA.

 

[corn18]

Hubris will prevent rational thought. They are rich because they were smart and picked a winner. Anything you say will not change that.

A black swan event for an indexer is a 50% drop in the market. We can recover from that. A black swan event for a single stock picker is 100% drop with no recovery. That's why there are a lot more well off indexers than stonk pickers.

 

[Out-to-Lunch]

"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.

 

[FLSUnFIRE]

I had quite a few older coworkers that would spend half the day talking hot penny stocks (I think just one or two cause someone knew someone). This was before the '08 crash. Another was about ready to retire and feeling rich all in equities* and when the crash came he ended up working another 10 years. The penny stock folks all quickly stopped talking their game. I've never seen such a sad group. They tried talking me into joining the party. I kindly declined (I did look up the companies out of morbid curiosity) and kept feeding my index funds and am now happily FIREd younger than they were then!


* I'm about 100% diversified equities but anticipate a 30-50% drop sometime and am confident I can weather it.