On the challenges of managing a portfolio full of single stock positions.
Notes
Two ways to build a long-term stock portfolio.
1) Easy, simple, higher probability route
A) Potential ROI will be lower.
B) Build a diversified stock portfolio using broad-based ETFs (SPY, IWM, MDY, USRT, EFA, EEM)
C) A diversified stock portfolio is INCAPABLE of delivering a permanent loss historically. A permanent loss is a human accomplishment created by fearful investors turning temporary drawdowns into permanent losses by selling.
D) Sell covered calls and/or buy protective puts to minimize the damage in the interim.
2) Harder, more complex, lower probability route
A) Potential ROI will be higher.
B) Build a stock portfolio of INDIVIDUAL stock positions (basket of 5 or 10 positions)
i.) implicit bet that your basket of 5/10 will do BETTER than the rest of the market.
C) A basket of 5 or 10 stocks CAN deliver permanent losses because historically the majority of individual companies go down and never go back up!
D) In the midst of a bear market it is HARD to decide whether to STAY or GO when you have a basket of random stocks.
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