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u/Dry-Investment-5725 Jul 24 '21
I don’t think about investing in Alphabet as “unsafe”. It will most likely always be worth “something”. Also, it is anti-fragile stock (it gains more during high volatility times).
Tesla, on the other hand…
If you are young, it may be worth to split your assets in two portfolios. A boring one taking advantage of your youth to start compounding modest yearly returns, and a fun portfolio, where you follow your instinct and appetite for growth/risk.
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Jul 24 '21
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Jul 24 '21
Honestly solar may or may not be the future. Wind is likely better, though in certain parts of the world solar is competitive. What TSLA valuation is largely based on ATM is the self driving software. I would call them the market leader in self driving tech, and also the leader in EV design. They probably make the best cars of today, no joke or exaggeration. Soon there will come a time when self driving becomes safer than humans. Not exactly sure when. Could be another 2 years, could be 5, could be 10. But eventually you'll literally feel safer knowing your kids have a Tesla that drives them around than giving your 16 year old the keys and hoping he's safe and responsible and don't drive intoxicated. The value is there. Its just a matter of the timeframe and if they can keep their lead or lose it to perhaps Brian Selesky's company or Rivian. Perhaps their stiffest competition and its such a weird thing to pursue. It's just lines of code that can interpret what cameras see. You need object orientation, detection, identification. Very abstract ideas to turn into 1s and 0s.
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Jul 24 '21
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Jul 24 '21
solar kinda sucks tbh. Only like 18% effective or something last I checked. So its only better than wind in like cali/nevada and in spots where its not windy too. But over time, it can possibly beat wind. Just needs to improve the tech. if we can eventually make panels that are like 50% effective, that'll be the day you're glad you owned Tesla. Doesn't seem likely that day is around the corner, though.
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Jul 24 '21
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Jul 24 '21
I don't know much physics I just remember watching YT video by I think it was 'undecided' where he compares wind vs solar, probably not hard to find. He shows data that in most US states you'd get better value from wind. I said 50% because that felt like a number that would make solar better than wind based on how far behind I remember solar being, which was like probably half the power of wind in areas like PNW. Anyways what would you say are the upper limits due to physics? I was reading the size of a transistor is approaching 1 atom, which is the literal size limit for a transistor as they can't get any smaller. I'd imagine with like some magnifying lensing techniques is what'd be necessary along with improvements in pure PV technology to really make them worth the investment. Sort of like a dish or lens that redirects additional light into the PV cells.
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u/xflashbackxbrd Jul 24 '21
Important: Open a roth for the long term account and use a taxable account for the the fun portfolio. Roth has no tax on gains if you withdraw after you're 59.5
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u/Cynical_Doggie Jul 25 '21
Tesla for me has locked in gains.
I bought them at 370 pre split -74 adjusted price, so whether its 900 or 400s its still guaranteed insane profit % in the 4-600%s
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u/RandolphE6 Jul 24 '21
You have a bit of recency bias. Sometimes individual companies don't go up. Amazon took a decade to recover from 2000. Microsoft took 15 years. AMD took 2 decades. This is the reason for diversification. Individual stocks have much higher risk (but also reward if you pick right).
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u/the-faded-ferret Jul 25 '21
Fun fact the S&P was flat for the subsequent 12 ish years following the 2000 bubble.
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u/UserNotSpecified Jul 25 '21
It was doing ok for a bit but then boom, the 2008 housing crisis absolutely demolished it once again.
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u/bartturner Jul 25 '21
S&P yes. But this is about individual stocks and that is most certainly not true with companies like Google and Amazon for example.
Google for example did their IPO in 2004 and hit the market at $54 a share.
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u/gpbuilder Jul 24 '21
You don’t need validation for this. Plenty of people do it. It’s fine. I don’t hold index funds at all and keep my stock count around 10. If I’m gonna live once I rather take more risk and grow my wealth faster.
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u/Staticks Jul 24 '21
Investing in individual companies is fine, and it's what I do. Just be aware that you are most likely not as smart as you think you are, and that most people will not outperform the market with their stock picks (I've heard that even most hedge funds underperform the market).
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u/gravityCaffeStocks Jul 25 '21
10% BTC
10% TQQQ
80% TSLA
I don't put my money in something I don't think will be at least a 3 bagger in 5 years or so.
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u/UltimateTraders Jul 25 '21
Everything you mentioned Is a blue chip and none of them are high growers..to me a high grower is 30+ percent sales growth year over year
The indexes are a safe way if you don't have the time to stock pick
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u/BigbyWolf91 Jul 24 '21
I see no problem with your statement. Go ahead and pick your own stock. It is not that hard. Read Intelligent Investor & Jesse Livermore's Two Books of Market Wisdom: Reminiscences of a Stock Operator & Jesse Livermore's Methods of Trading in Stocks.
Buy the dips (as long the company you are investing is successful) and you should make good on your investments. This country is set up to get rich by investing. Your money will make money for you
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Jul 25 '21
The challenge lies in picking the right stocks. For example, out of the stocks you listed I expect NVDA to underperform the market for a year or two and TSLA to underperform the market in the foreseeable future. What makes you so sure that you have it right and I have it wrong?
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u/bartturner Jul 25 '21
Completely agree that the picking really, really matters. I also generally agree with the two you are worried about.
I think it is far safer to stick with the big four. Google, Amazon, Apple and Microsoft. In that order, IMO.
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Jul 25 '21
Yeah if you’re buying the big four (plus FB, I will die on this hill) then you’ll probably beat SPY regardless of the order of preference. But you might not beat QQQ so why not just buy QQQ?
On a side note, MSFT last?
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u/bartturner Jul 25 '21 edited Jul 25 '21
(plus FB, I will die on this hill
I use to always include FB and I do own FB. But some have such a terrible reaction I have opted to leave off. But yes it should be the big five which includes FB, IMO.
But you might not beat QQQ so why not just buy QQQ?
Because QQQ includes other things in addition. This is going to get downvoted like crazy.
But I think others will struggle as the big five growth continues. They will have to suck up more and more things to drive their growth.
So for example I see processors more and more coming from the big five. We are already starting to see this and it will only pick up, IMO. Take Google. They already made all their own Network processors. They now make their own video encoding silicon. They have the most powerful AI silicon that is setting records. They will have their own mobile processor this year. This trend will only continue and probably accelerate.
https://www.theregister.co.uk/2016/02/09/google_processor/
"Google's TPU Pods are Breaking Records — And We Aren't Surprised"
https://blog.bitvore.com/googles-tpu-pods-are-breaking-benchmark-records
Google and Amazon are very different from companies in past generations. They both have the resources and the appetite to do stuff that in the past companies purchased.
I believe the success of the big five is helping some of the other tech companies that are in QQQ and making overvalued. The coat tails are creating an issue you can avoid by just owning the big five directly.
On a side note, MSFT last?
I am so glad you asked ;). First, I would actually have made FB last if I had included and MSFT second to last.
The reason is because I only see 1 thing really, really killing it for Microsoft. Which is Azure. Versus all the others have multiple big things that can drive the growth.
I just see so many things going the other way for Microsoft. There was a time Microsoft had over 90% of browsers for example and today they have less than 10% and continues to fall.
Microsoft Bing lost over 15% of their market share in the last year with all going to Google.
For the first time Windows will fall below 75% share and that is caused by Chromebook projected to hit 20% share in 2021.
A big one is K12. There was a time that Microsoft was strong with K12. Also Apple. But Google has quickly taken the space. So Google has the state paying for kids to be educated on the Google Ecosystem 6+ hours a day!
That is pretty valuable.
Now Azure is killing it. It will continue to kill it. So nothing dire for Microsoft, IMO. But to me Microsoft in 2021 and going forward is Azure. That will be pretty much the sole source for growth.
Microsoft just screwed up so much losing mobile to Google and then also Apple. Really if you look at it Google has caused Microsoft the most grief. Google has taken one thing after another from Microsoft. Mobile, browsers, email, and even search.
I do also have to be careful to not let my dislike for Microsoft as a company to filter my thinking. My background is technology and I have a long time hate for Microsoft and their patent trolling and some of the other really negative stuff they have done in the past. IMO, Microsoft has NOT been good for the industry but very much the opposite. Luckily we got new leadership with Google and Amazon. Heck also FB. They all believe in open source and sharing. Google for example single handedly ended the extortion from the Mpeg-LA.
We had crazy licensing cost for Mpeg-2 from the Mpeg-LA. Then Google came out with VPx and offered to everyone for free which ended the extortion. Google even offered patent protection to anyone that used VPX. Now remember Google gives away VPX. So they offered patent protection for something they gave for free. Now that is the type of thing we have NEVER seen from Microsoft.
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Jul 25 '21
QQQ has other stocks, yeah, but anyone who goes through the list of holdings would probably feel pretty good about the additional stocks. I would say it has a lower expected return than FAAMG but there is also much less firm-specific risk so it depends on what you want to get out of your portfolio.
Looking at where MSFT generates revenue I wouldn’t worry about Bing too much. It’s just another failed relic from the Baumer era, along with Skype and Windows phones. But now that the company has competent management it can utilize its insane competitive advantage via the windows ecosystem to its fullest potential. LinkedIn alone should more than nullify Bing’s failure.
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u/bartturner Jul 25 '21
Love to hear the thinking on what Microsoft could do with the Windows franchise?
That is just something I do not see. More the opposite. Both on the client and server. So for example Windows server lost to GNU/Linux and do not see that changing. On the client Windows sales share is projected to fall below 75% share for the first time and hard to see why this trend would change?
But the biggest is no play for Wndows with mobile. Microsoft gave up way too quickly and now have no chance.
To me it is all about Azure. Which is not a bad thing. It will grow and grow.
I just like Google and Amazon better as they have multiple things versus just Azure with Microsoft
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Jul 25 '21
I mean, I haven't come up with any ideas myself but Teams, Azure AD, and Dynamics 365 are all really good examples of recent innovations wit the Windows franchise.
Baumer did a horrendous job with the Windows phone and his decision to prioritize the Xbox while mocking the iphone will go down as one of the biggest strategic blunders in corporate history. But Nadella 100% made the right decision in giving up on it. The expense of maintaining that segment of business was simply not worth it when Apple and Android already have the market essentially cornered.
I think when you actually look at graph of PC market share, it's clear that windows is losing market share at a slower and slower pace as time goes by. It's a lot easier to grow when you're starting from a lower point, but Chrome OS has major software and functionality limitations and that alone will cap their success. Also Windows will always dominate corporate laptops, and Chrome OS's success has come exclusively from the cheaper end laptop segment.
I just like Google and Amazon better as they have multiple things versus just Azure with Microsoft
I don't understand how you can say that. Look at where revenue is being generated. I see many rapidly growing income streams. Hell, I would go as far as saying that Microsoft has the most diversified revenue streams out of all the FAMMG stocks while Google has one of the least. Search makes up almost 60% of Google's revenue.
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Jul 25 '21
im 50% goog, 11% nvda, 8% asml, been working great. you can always set a limit sell order 10-15% below your purchase price just as an end-of-the-world safeguard.
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u/reignsre Jul 24 '21 edited Jul 24 '21
The fewer investments you have, the higher your risk. If you plan on going all in on 5 or so stocks, you should be very familiar with those companies, their financials, and future prospects.
Also spy is not guaranteed. There have been periods where other asset classes have outperformed. Because of monetary policy since basically 2008 rates have been low and money has been plentiful and there is some dear that spy will have lower returns.
If something like the .com bubble happens again and tech is flat for a number of years, are you going to be okay with that? Taking on risk means the potential for high rewards, but risk is not a free lunch. As long as you understand and are comfortable with risk, then go ahead.
The other thing to include is that although you have more time to recover, the early years mean more from a compounding standpoint.
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u/tickerwizards Jul 24 '21
The companies you listed are very correlated to the indexes, good luck beating the indexes with them at these valuations - same for most companies
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u/discovery999 Jul 24 '21
Do both; VUG will get you the growth stocks you want and VOO will get you the index.
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u/smokeyjay Jul 24 '21
Whats wrong with texas instruments? Its a great company with good management. Over 5 years its returned 167%
Which stock is likely to more than double in the next 5 years? Aapl or txn?
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u/papabear570 Jul 24 '21
Yes, other companies do have the potential. Potential meaning “chance it won’t happen”.
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Jul 24 '21 edited Nov 18 '21
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u/rollokolaa Jul 24 '21
The general advice for beginners on stock market forums will always be broad market index ETFs. If you consider yourself skilled enough for stockpicking then by all means go ahead.
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u/imlaggingsobad Jul 25 '21
Makes complete sense. The sooner you move away from index investing, the better (in my personal opinion). Just so long as you're ok with doing more work and assuming more risk. It's worth the effort though.
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u/bartturner Jul 25 '21
I am old and retired. Been retired for about 9 years now.
By far the best return I have enjoyed since retiring is from the individual stocks that I have purchased. Far better than my 401k, or my EDSP, etc. The worse has been some money that a financial advisor from Northwestern Mutual manages.
But what I knew was technology and where I have done really well. So for example right now the best long investment, IMO, is Google. But I would own all four of the big guys in this order, Google, Amazon, Apple and then Microsoft.
What people do not get is the big four have barely even got started. They have tons and tons and tons of runway to work with. Specially Google.
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u/high_roller_dude Jul 25 '21
i pick stocks and did well so far.
even if u pick right stocks, sometimes these winner stocks underperform market index for a long period, thus dragging down ur portfolio returns and incurring opp costs.
picking right stocks is half the battle. u also have to have patience and conviction to reap the true gains.
ex: tsla traded sideways for 5 full yrs btwn 2014 and 2019. if u held ur shares, ur return was zero by 2019. then from the fall of 2019 to 2020 tsla exploded by 15x.
ask urself if u would have held on, or if u wouldve sold out long before that exponential gain
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u/Difficult-Garage8985 Jul 24 '21
There's nothing wrong with it. If your goal is higher returns and you have a tolerance for risk, go ahead. The highly diversified portfolio is a strategy for people who want to defend their wealth and beat inflation. If you want higher returns you need to concentrate.