6 ms·

Dumb question, as I literally know nothing about stock or savings: isn't it generally a bad idea to put 100% of your long term money in any one place?

simonsarris 14y ago
Sorry, I'm only referring to new money: every 2 weeks I put $1000 into my brokerage account to buy whatever long term stocks/funds on my watchlist look good that week. Lately that's been nothing but Target, but it might switch to nothing but Amazon next month, or 50% AMZN 50% something else, and so on. So it's just the new money coming into the account getting divvied up, but doesn't reflect the actual holdings of long term account as a whole (which might only be 20% TGT and 80% other stuff)
- Retric 14y ago
  You might want to consider buying 2000$ every 4 weeks depending on your transaction fees.
  - MichaelApproved 14y ago
    $2,000 is better but even that's rough. Consider you have $7 commission. With each $1,000 purchase, you have to earn 0.70% just to earn back that $7. If you sell that $1,000 purchase, it'll cost another 0.70%, totaling 1.4% in fees. Based on your strategy you're probably incrementally purchasing and the selling in bulk so the sell commission isn't as damaging but losing 0.70% of an investment right off the bat makes it hard to be profitable. Even half that amount, if you increase your lots to $2,000, is painful.
gojomo 14y ago
That's a smart question. I hope simonsarris means 100% of his incremental dollars (new savings), and that he already has other other 'long-term dollars' in a broader range of investments.
rorrr 14y ago
Yes, it's a horrible idea. That's basically playing a lottery, since unexpected things happen all the time, successful companies go out of business (Yahoo, and AOL looked pretty damn good 10 years ago).
- gabemart 14y ago
  It's a good idea if and only if you believe your personal access to information and ability to perform analysis is greater than the aggregate capability of the market as a whole.
- confluence 14y ago
  Yahoo! and AOL did not look good 10 years ago. They were selling at insane P/E ratios and had absolutely no way of making good on those numbers. If you invested in them - you'd be a moron. Unexpected things really don't happen very often and black swan risk is way overblown. When things blow up - they're a long time coming - you just didn't see the data.
confluence 14y ago
Isn't it stupid to just to have one job, one car, be a citizen of one country, have one house and one family. I mean really - one must diversify. What would you do if you lost any one of those? No, it's not stupid to concentrate wealth. Problems only arise when you do it stupidly, like buying too big a house, being part of the wrong family, living in the wrong country or buying an unsafe car. Diversification does not reduce risk but it cuts your returns in half. All correlations go to one in a crisis and you can't hedge the end of the world. Note: To all downvoters - putting all your eggs in multiple baskets does not protect you from an asteroid impact any more than a person with all eggs in one basket. People who think diversification makes them safe are frankly wrong.
- mylittlepony 14y ago
  Diversification does reduce the risk of losing it all, as it changes the probability distribution (https://en.wikipedia.org/wiki/Probability_distribution https://en.wikipedia.org/wiki/Probability_distribution). It also reduces the probability of winning a lot, but people like stability.
  - confluence 14y ago
    Only if the assets are uncorrelated and independent. Otherwise diversification often gives a false sense of security with higher systemic risk (see GFC).
    - Someone 14y ago
      Not "Only if the assets are uncorrelated and independent", but "As soon as the assets are not 100% correlated". That is a huge difference. The dot com bust affected (almost) all tech stocks, but they didn't all go bankrupt.
- mikeash 14y ago
  I assume you don't bother to back up your data either.
  - 14y ago

simonsarris 14y ago

Sorry, I'm only referring to new money: every 2 weeks I put $1000 into my brokerage account to buy whatever long term stocks/funds on my watchlist look good that week. Lately that's been nothing but Target, but it might switch to nothing but Amazon next month, or 50% AMZN 50% something else, and so on. So it's just the new money coming into the account getting divvied up, but doesn't reflect the actual holdings of long term account as a whole (which might only be 20% TGT and 80% other stuff)

Retric 14y ago
You might want to consider buying 2000$ every 4 weeks depending on your transaction fees.
- MichaelApproved 14y ago
  $2,000 is better but even that's rough. Consider you have $7 commission. With each $1,000 purchase, you have to earn 0.70% just to earn back that $7. If you sell that $1,000 purchase, it'll cost another 0.70%, totaling 1.4% in fees. Based on your strategy you're probably incrementally purchasing and the selling in bulk so the sell commission isn't as damaging but losing 0.70% of an investment right off the bat makes it hard to be profitable. Even half that amount, if you increase your lots to $2,000, is painful.

gojomo 14y ago

That's a smart question. I hope simonsarris means 100% of his incremental dollars (new savings), and that he already has other other 'long-term dollars' in a broader range of investments.

rorrr 14y ago

Yes, it's a horrible idea. That's basically playing a lottery, since unexpected things happen all the time, successful companies go out of business (Yahoo, and AOL looked pretty damn good 10 years ago).

gabemart 14y ago
It's a good idea if and only if you believe your personal access to information and ability to perform analysis is greater than the aggregate capability of the market as a whole.
confluence 14y ago
Yahoo! and AOL did not look good 10 years ago. They were selling at insane P/E ratios and had absolutely no way of making good on those numbers. If you invested in them - you'd be a moron. Unexpected things really don't happen very often and black swan risk is way overblown. When things blow up - they're a long time coming - you just didn't see the data.

confluence 14y ago

Isn't it stupid to just to have one job, one car, be a citizen of one country, have one house and one family. I mean really - one must diversify. What would you do if you lost any one of those? No, it's not stupid to concentrate wealth. Problems only arise when you do it stupidly, like buying too big a house, being part of the wrong family, living in the wrong country or buying an unsafe car. Diversification does not reduce risk but it cuts your returns in half. All correlations go to one in a crisis and you can't hedge the end of the world. Note: To all downvoters - putting all your eggs in multiple baskets does not protect you from an asteroid impact any more than a person with all eggs in one basket. People who think diversification makes them safe are frankly wrong.

mylittlepony 14y ago
Diversification does reduce the risk of losing it all, as it changes the probability distribution (https://en.wikipedia.org/wiki/Probability_distribution https://en.wikipedia.org/wiki/Probability_distribution). It also reduces the probability of winning a lot, but people like stability.
- confluence 14y ago
  Only if the assets are uncorrelated and independent. Otherwise diversification often gives a false sense of security with higher systemic risk (see GFC).
  - Someone 14y ago
    Not "Only if the assets are uncorrelated and independent", but "As soon as the assets are not 100% correlated". That is a huge difference. The dot com bust affected (almost) all tech stocks, but they didn't all go bankrupt.
mikeash 14y ago
I assume you don't bother to back up your data either.
- 14y ago