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Tales of a Technician: Managing Single Stock Portfolios

November 7, 2022

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On the challenges of managing a portfolio full of single stock positions.


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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