Individual Stock Picking Results After 2.5 Years

[disneysteve]

I doubt it will make a difference for you by the time you are ready to retire if you continue saving at your present rate (assuming you still keep your expenses low). But, then you could probably be in a 70% cash position and still be okay because chances are pretty good you will probably have saved a lot more than what you require to retire.

Exactly, and why take unnecessary risk? If you can be 70% cash and have all that you need, why not do that?

Suze Orman used to say (I assume it's still true) that she is 100% in municipal bonds. If that generates sufficient income to meet your needs for the rest of your life, great.

[Like2Plan]

Why should we reduce our "risk" as we get older? I know this is what's said by financial advisors but will you come out on top with that frame of thinking?

I doubt it will make a difference for you by the time you are ready to retire if you continue saving at your present rate (assuming you still keep your expenses low). But, then you could probably be in a 70% cash position and still be okay because chances are pretty good you will probably have saved a lot more than what you require to retire.

I think Warren Buffet said 90% S&P and 10% bonds for his wife if he should predecease her. I figure she could probably live off the 10% bonds to get her through a major recession.

[Singuy]

Your thread title says these results are from the past 2.5 years so you have yet to see a recession with this portfolio. Ups and downs of any individual company are not at all the same thing as I'm sure you know.

That said, I think you're right. You don't make the money during the recession. You make money in the recovery. Buy low, sell high, which is exactly the opposite of what the average Joe does which is buy when confidence is strong and prices are hitting daily records and then panic and sell when the market drops.

High beta stocks simulate recessions of Index funds very well. You can have a year worth of gains of 30-40%+ and be wipe out and being in the negatives within 2 months. It's like recession on steroids. I made the argument to Tom that this prepares you for the next real recession as you become less and less phased by paper losses. In the beginning I would feel the hind-sight 20/20 burn. I used to want to sell when things are bad vs buy. Now I just end up doubling down my position and could care less. I take this as a training program..and that's why I welcome the next recession.

[disneysteve]

My portfolio has been through multiple "recessions" already.

Your thread title says these results are from the past 2.5 years so you have yet to see a recession with this portfolio. Ups and downs of any individual company are not at all the same thing as I'm sure you know.

That said, I think you're right. You don't make the money during the recession. You make money in the recovery. Buy low, sell high, which is exactly the opposite of what the average Joe does which is buy when confidence is strong and prices are hitting daily records and then panic and sell when the market drops.

[Singuy]

Exactly beating the market in the recession then you might as well quit your dayjob and become warren buffet. The bull market has made it all easy. I will second that. I think that knowing what you have and preserving capital as you get older is important. When you can't risk a 20% drop. Of course if you have excessive amounts of funds then it wouldn't matter. But if you are living on the edge retiring with very close to "enough" and already living below poverty line like MMM followers living austerely because you want to. There isn't much you can do to cut costs nor save if you are "retired".

Warren Buffet doesn't win during a recession. He wins massively coming out of a recession. I follow his rules which lead me to the high returns.

1. Stick to something you understand (in my case tech).
2. Be greedy when others are fearful

My portfolio has been through multiple "recessions" already. Both AMD and TSLA had negative returns of large magnitude at one point or another. I had -45k or lower with AMD and with TSLA at least once in my account. But when you play with large numbers, believe in the company, and have very little care about paper losses, coming out the other end skyrockets the return which I'm sure Warren pretty much made his wealth this way.

In fact I have clearly documented my wins and losses with these two companies on this forum so it's not like I hide my losses and only shows my wins. I'm not sure how easy it is to pick multi-bagging high beta stocks during any market. In fact not one person here jumped on the wagon with me when I advocated a buy. So conviction is part of the story...since you guys had no conviction and was more loss adverse, even me spoon feeding these stocks to the forum resulted in no one participated. I mean it can't be any "easier" than that for you guys since I did the research and made my argument. My only success is prevented a guy from losing on Tesla.

[LivingAlmostLarge]

Exactly beating the market in the recession then you might as well quit your dayjob and become warren buffet. The bull market has made it all easy. I will second that. I think that knowing what you have and preserving capital as you get older is important. When you can't risk a 20% drop. Of course if you have excessive amounts of funds then it wouldn't matter. But if you are living on the edge retiring with very close to "enough" and already living below poverty line like MMM followers living austerely because you want to. There isn't much you can do to cut costs nor save if you are "retired".

[rennigade]

Thats certainly a good run, but we're still in a massive bull market...which makes picking winners much easier. If you can produce the same results during the next recession, that would be legendary.

[disneysteve]

Why should we reduce our "risk" as we get older?

That's a very good question. Certainly, everyone's risk tolerance is different, so that has to play into it.

I'd say one thing that changed in our situation is that my income more than doubled over the last 2 years so we've been able to really ramp up the amount going into savings. As a result, we could still stay on track to meet our goals while also taking less risk and seeing less volatility in our holdings. If I can get where I'm going at 65/35 rather than 80/20, I'm okay with that. I just recently (a week or so ago) realized that the stocks had dropped to 61 which is a little lower than I want it so I am currently working to bring it back up into the 65-70 range. I reworked my spreadsheet to make it easier to see that info and track it better going forward. I don't see myself dropping below that anytime soon.

I think the bottom line is that you should look at your goals and invest however you need to to meet them while also taking no more risk than necessary to get there.

[Singuy]

Absolutely. Just to be clear, I didn't alter our asset allocation as a result of market timing. I did it with intent to reduce our risk level as we are marching toward retirement. And I didn't go selling off a bunch of stuff (I did shift some assets in retirement accounts where there was no tax implication). I mainly did it through redirecting new money.

I'm not a market timer either.

Why should we reduce our "risk" as we get older? I know this is what's said by financial advisors but will you come out on top with that frame of thinking?

Lets assume you have 2 million in stocks.

It took 2 years to hit the bottom of the recession and 2 year to bounce back..so within 4 years your withdrawal rate averages to be 50% of the actual dip. But then 4 years after that your 100% stock portfolio will knock the person who reduced risk out of the park. This is assuming you didn't withdrawal a million after your stock was down by 40%. You would only take a little at a time averaging down.

If you withdraw 100k/year from 2 million cash, after 4 years you end up with 1.6mil, after 8 years you have 1.2 million.
If you withdraw 100k from 2 million stocks, after 2 years you have 1 million(cause your stock crashed and you withdrew 200k), the next two years you have 1.2 million after 200k withdraw(gains minus withdraw)), and 4 years later you have 1.8 million (1 million gain - 400k withdrawal). You will be sitting on 2 million in stock by 2020 including withdraws. while the cash guy is hitting less than a million.

[disneysteve]

mathematically it's always better to dollar cost average than timing the market.

Absolutely. Just to be clear, I didn't alter our asset allocation as a result of market timing. I did it with intent to reduce our risk level as we are marching toward retirement. And I didn't go selling off a bunch of stuff (I did shift some assets in retirement accounts where there was no tax implication). I mainly did it through redirecting new money.

I'm not a market timer either.

[Singuy]

I'm kind of hoping for another housing crash to buy a place in Florida. Last time around, we weren't ready to do that financially or stage of life-wise.

As for investments, we've been steadily trimming back our stock allocation (now at about 60%) and building our cash position so we should be in pretty good shape when the next down market hits. Our portfolio won't take as big of a hit as when we were 85% stock and we are sitting on more cash that we can use to pounce on whatever opportunities present themselves whether it's a down payment on a house or something else.

mathematically it's always better to dollar cost average than timing the market.

I have a friend who thinks Dow breaking 20k is a sign of over buying. That in conjunction of recession looming, he decided to time the market. So now dow is 26k after 2.5 years since then. If there is a recession in 2021 and Dow drops from 29k down to 22k..then congrats, you have done nothing but lost money due to time decay, losing all the dividends for reinvestment and 2k of potential gains. Also not a single person bought their entire position at 29k, so the average between 20k to 29k run up from dollar cost averaging is 24.5k cost basis. So essentially your loss is not that bad vs the other guy, who most likely couldn't time the bottom, ended losing on the dividend and has a cost basis similar to yours.

The only people who win timing the recession are the one who got it right under 6 months time.

[disneysteve]

I agree I hoping for the next recession. I'd like to pick up real estate and stocks. We invested heavily in stocks and it paid back in spades. But I'd like some real estate. In 2001 when 9/11 hit I had no money.

I'm kind of hoping for another housing crash to buy a place in Florida. Last time around, we weren't ready to do that financially or stage of life-wise.

As for investments, we've been steadily trimming back our stock allocation (now at about 60%) and building our cash position so we should be in pretty good shape when the next down market hits. Our portfolio won't take as big of a hit as when we were 85% stock and we are sitting on more cash that we can use to pounce on whatever opportunities present themselves whether it's a down payment on a house or something else.

[LivingAlmostLarge]

I agree I hoping for the next recession. I'd like to pick up real estate and stocks. We invested heavily in stocks and it paid back in spades. But I'd like some real estate. In 2001 when 9/11 hit I had no money. My co worker grad student his girlfriend was working full time manager for clothing company. She made probably around $100k. We were making $22k (and jointly my DH made equally). Sigh. So anyway he began buying airline stocks for literal pennies. United, American, etc. In five years it paid back in spades. He flipped that into more investments while we were in grad school. After we finished phd he went on to his mba. Last I saw he's racking it in millions in private investment firm. Oh well. I wish I had been able to listen to him then.

At the time he told me, look you won't get rich in academia, but if you are going to do it, invest every penny when the market drops. Be brave when everyone else is fearful even just an index fund. You'll come out so far ahead you'll subsidize your poor career choice. I did it more in 2007/2008. I recall looking at our statements and the balance kept going down the more we invested in 401k and taxable accounts. I recall investing like $50k and seeing $17k balance. Now well we've invested I calculated a little over $600k and our portfolio is around $1.4m and that's taking into account a $100k+ loss on oil from my husband playing with some fun money on oil commodities trading in 2012-2014. He stopped after oil started tanking and he kept buying on the way down.

Right now we probably have around $200k in individual stocks bought a long time ago. Disney being one. We used to own Marvel. We had more time before kids. Anyway now we hang onto the stock just because and I pretty much buy etfs. Honestly I mostly stick to VTI.

[disneysteve]

Total taxable portfolio is like 70%. Total overall is about 40%.

DIS is like less than 1%.

I welcome the next recession so I can buy more. Lost the opportunity last time because I was too busy paying off my house.

As long as these companies doesn't go under, I'll be okay. Actually even if I lose this entire portfolio, we will be okay. Took us 2 years to save up 400k..losing 2 years of savings at 36 is a blimp in our financial roadmap.

Fantastic! In that case, you are in a great position going forward. And I totally agree about seizing the opportunity that will present itself with the next big correction.

[Singuy]

Total taxable portfolio is like 70%. Total overall is about 40%.

DIS is like less than 1%.

I welcome the next recession so I can buy more. Lost the opportunity last time because I was too busy paying off my house.

As long as these companies doesn't go under, I'll be okay. Actually even if I lose this entire portfolio, we will be okay. Took us 2 years to save up 400k..losing 2 years of savings at 36 is a blimp in our financial roadmap.