Author Topic: What is your most concentrated investment(s)?  (Read 4588 times)

Pylortes

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What is your most concentrated investment(s)?
« on: January 19, 2017, 08:31:18 AM »
As a percentage of net worth, what are your 2-3 most concentrated investments?  Please exclude index funds that cover broad swaths of the market as I would not consider owning a large bucket of stocks overly concentrated (although I acknowledge you are still subject to significant market/economic risk).  Industry specific mutual funds are okay to list (example a fund that owns only health care, tech or mining stocks since you're also industry concentrated in that case). I'm curious where home equity, stocks, cash, outside real estate, promissory notes, etc fall, and any comments you might have about your level.

I'll go first- I have a single small company stock (not my employer!) that is currently about 27% of net worth.  I originally invested around 15% of net worth in it at the time, and it has grown to this higher concentrated position without further investments, but since the company continues to execute well I have not sold shares.  This could change in the future.  My second most concentrated position is another stock (larger company) that comprises about 11% of net worth.  Interestingly, in my case home equity only comes in about 4% of net worth even though I have been faithfully making scheduled mortgaged payments for several years (I have not prepaid the mortgage however).  I also own quite a few index mutual funds in 401ks which total somewhere between 25-30% net worth but I'm not counting in my concentration discussion.

Interestingly in my case 2 individual stocks make up 38% of net worth, so as you can see I am particularly concentrated.  So for me, reviewing the quarterly and annual reports of those companies is arguably a bigger deal than keeping up on my home maintenance or property taxes!  I feel like I am more concentrated than most (assuming you exclude index funds), but am comfortable with this level for now.  I could see myself in the future wanting to cap a single investment at say 15-20%.  I'm guessing there are people with a higher percentage of net worth with home equity in a single property- does this high level of concentration give you pause (even with property insurance)?

fatcow240

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Re: What is your most concentrated investment(s)?
« Reply #1 on: January 19, 2017, 08:51:54 AM »
My highest is my current employer at 35% (high-tech manufacturing).  This includes restricted stocks, options (vested and un-vested), discounted stock purchases. 

About 68% of my holdings with this company are not vested, so I can't diversify them.  About 19% are vested options that don't make sense to exercise.

ShoulderThingThatGoesUp

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Re: What is your most concentrated investment(s)?
« Reply #2 on: January 19, 2017, 08:52:25 AM »
Well, there's no mortgage on my house, so that's $175k. After that I have about $12k of employer stock in my 401k because that's how they match.

Pylortes

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Re: What is your most concentrated investment(s)?
« Reply #3 on: January 19, 2017, 09:03:00 AM »
My highest is my current employer at 35% (high-tech manufacturing).  This includes restricted stocks, options (vested and un-vested), discounted stock purchases. 

About 68% of my holdings with this company are not vested, so I can't diversify them.  About 19% are vested options that don't make sense to exercise.

When you factor in your income is also likely dependent on this company that is pretty concentrated, but understandable given the set-up with your employment.  Have you given a thought to selling some company stock as it vests to try and move some out to other places?

Papa bear

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Re: What is your most concentrated investment(s)?
« Reply #4 on: January 19, 2017, 09:04:14 AM »
Rental real estate at approx 50% of net worth


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trollwithamustache

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Re: What is your most concentrated investment(s)?
« Reply #5 on: January 19, 2017, 09:05:56 AM »
In my way of thinking, you've muddled a couple categories... Overall, if I bought a big stake in one company and it went up from 15% of portfolio to 27 I'd be selling some!

The House being a big % of net worth is a bit of a different animal as you need a place to live. Owning a home gives you lifestyle security in a place you want to live. Arguably with insurance, it will never go to zero in value. (even if housing prices drop substantially, if you are in a place you want to live, its always worth that to you).  At the same time, if your house doubles in value that doesn't mean much if you really don't want to move.

If you own  a company it is reasonable to have a big % of your worth tied up in it.  As an owner,  you control the decisions. With company's you've invested, your info comes after the fact in the 10k and you likely do not have access to real insider information. Which would of course be illegal to trade on, yet how many stocks to you see move before news?

For zesty things and individual equities, I limit to 5% of total Portfolio / 10% of the portfolio for such things. (I look at portfolio only, exclude the house).   As things go up I slowly sell to maintain this, I've missed some home runs this way and avoided some real disasters too. You don't mention if this is in taxable or pre-tax accounts... the tax man takes his share of your winnings and you get to pay for your losses. Maybe you can carry a loss forward but if your gains and losses don't neatly fall into tax years to offset, taxes can affect the risk/reward trade off you may think you're making.

For those with restricted holdings in an employer's stock, I don't necessarily value those at full market value until they become unrestricted. They are hope and potential and may well be worth working for, but are not yet net worth. 

fatcow240

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Re: What is your most concentrated investment(s)?
« Reply #6 on: January 19, 2017, 09:24:57 AM »
My highest is my current employer at 35% (high-tech manufacturing).  This includes restricted stocks, options (vested and un-vested), discounted stock purchases. 

About 68% of my holdings with this company are not vested, so I can't diversify them.  About 19% are vested options that don't make sense to exercise.

When you factor in your income is also likely dependent on this company that is pretty concentrated, but understandable given the set-up with your employment.  Have you given a thought to selling some company stock as it vests to try and move some out to other places?

I have been sweeping the dividends out to Vanguard (VTI).  You are right in that I should be moving more out.  I think the main reason I haven't is because there is only about $8k that makes sense and that I will have to pay some taxes on the gains.  I definitely will as the restricted units vest.  I have to pay the taxes as they vest anyway.

I think it makes sense to hold onto the options.  I couldn't get a cost equivalent investment.

brian313313

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Re: What is your most concentrated investment(s)?
« Reply #7 on: January 19, 2017, 09:57:33 AM »
If you own  a company it is reasonable to have a big % of your worth tied up in it.  As an owner,  you control the decisions. With company's you've invested, your info comes after the fact in the 10k and you likely do not have access to real insider information. Which would of course be illegal to trade on, yet how many stocks to you see move before news?

For zesty things and individual equities, I limit to 5% of total Portfolio / 10% of the portfolio for such things. (I look at portfolio only, exclude the house).   As things go up I slowly sell to maintain this, I've missed some home runs this way and avoided some real disasters too. You don't mention if this is in taxable or pre-tax accounts... the tax man takes his share of your winnings and you get to pay for your losses. Maybe you can carry a loss forward but if your gains and losses don't neatly fall into tax years to offset, taxes can affect the risk/reward trade off you may think you're making.


+1

My limits are 10% total portfolio per stock and 20% total in individual stocks but it's the same principal, I'm just taking more risk. I also only buy individual stocks when they are very good value. The financial sector crash & housing market crash where the only two times I've done this. I stay S&P 500 until a market crash, then un-diversify into the undervalued sector, sticking with solid companies. Researching the companies is too much work to do all the time for me, but I've made some great surges in my account on past recoveries from crashes. I also will not stay in for too long due to the increased risk.

Also, I work for an investment company and all we do is analyze risk, buy portfolios, and collect the money. There are ways to beat the market, but they are a lot of work. We have about 150 employees contributing to research and do not buy deals publicly. To try and beat the market on your own is very difficult. You're just trying to beat the market by taking more risk, but this could easily backfire. I learned this the hard way back in 2001.

Pylortes

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Re: What is your most concentrated investment(s)?
« Reply #8 on: January 19, 2017, 11:19:30 AM »
I am curious as to how much comfort we each have with concentration risk.  The discussion(s) on index funds vs. trying to beat the market has been well covered in other threads- so not too interested in re-hashing here.  I am comfortable with my risk profile for now, which many others would not be (which I get). Some people claim its ridiculous to have such concentration in individual stocks, but then you find out they may have north of 75% of their net worth tied up in their house.  That would be far too much for me personally, but circumstances can also play into it (HCOL area for example that has experienced rapid appreciation of housing).

tonysemail

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Re: What is your most concentrated investment(s)?
« Reply #9 on: January 19, 2017, 11:36:00 AM »
I have about 35% in rental properties and primary home.
My company stock (vested and unvested) is 16% which is far too high for me to be comfortable.
I've been steadily unloading it and diversifying for the past year.

bugbaby

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Re: What is your most concentrated investment(s)?
« Reply #10 on: January 19, 2017, 05:57:46 PM »
For me 50% in a rental house, 15% in cash (plan to buy a primary home), the rest in retirement index funds.

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Bones81

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Re: What is your most concentrated investment(s)?
« Reply #11 on: January 19, 2017, 08:06:21 PM »
Outside of my house and ETFs, Netflix is almost 4% of my investment portfolio.  Bought it back in 2010 and it's increased by 852%. 

MoonLiteNite

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Re: What is your most concentrated investment(s)?
« Reply #12 on: January 20, 2017, 05:05:00 AM »
house - 66% (damn thing keeps going up in value, about 20% in 2 years)
P2P lending - 8% (this will not be gaining any more funds, even though it is around 18% NAR)
ESPP - 5% (this gets cycled in and out every now and then to buy other funds)


Index funds(S&P tracker) - 15% (said not to count but i can't do the math...)
REITs - 3% (wanted to get some of these rolling, haven't put much in since my first buy)
Semicoductor ETF - 3% (meh just throwing some money at what is trending up)

AZDude

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Re: What is your most concentrated investment(s)?
« Reply #13 on: January 20, 2017, 01:30:43 PM »
REITs - ~10%
Some individual bonds - ~5%

Everything else is in index funds. These are mostly holdovers from an era when I thought I was a financial genius. Now I just automate everything and check in once a month or so. Stock picking or whatever sounds fun when you have $5K to invest. When its $50K, it seems less smart, and when it is $500K, it seems insanely stupid.

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Re: What is your most concentrated investment(s)?
« Reply #14 on: January 20, 2017, 08:43:11 PM »
Outside of my house and ETFs, Netflix is almost 4% of my investment portfolio.  Bought it back in 2010 and it's increased by 852%.

852%! Holy crap. However much Netflix you bought, I'll bet you wish you had bought a whole lot more.

Bones81

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Re: What is your most concentrated investment(s)?
« Reply #15 on: January 22, 2017, 11:11:40 AM »
Outside of my house and ETFs, Netflix is almost 4% of my investment portfolio.  Bought it back in 2010 and it's increased by 852%.

852%! Holy crap. However much Netflix you bought, I'll bet you wish you had bought a whole lot more.

Have had a few home runs like Netflix but also my fair share of duds.  I haven't bought individual stocks in years, pretty much all ETFs now. 

TomTX

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Re: What is your most concentrated investment(s)?
« Reply #16 on: January 22, 2017, 11:17:21 AM »
Um...

$150k+ in home equity.

Everything else is either quite small amounts, or TSM index fund.

Pylortes

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Re: What is your most concentrated investment(s)?
« Reply #17 on: January 22, 2017, 01:19:10 PM »
Outside of my house and ETFs, Netflix is almost 4% of my investment portfolio.  Bought it back in 2010 and it's increased by 852%.

852%! Holy crap. However much Netflix you bought, I'll bet you wish you had bought a whole lot more.

I agree, nice job on the Netfix pick! You only need a couple of similar ideas in your lifetime to play out and you're set.  Sounds like initial investment was relatively modest if it still only totals 4% of net worth.  Assuming it continues rising over time (which I expect this is a great stock to hold onto) what level of your net worth in Netflix would you be comfortable with?

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Re: What is your most concentrated investment(s)?
« Reply #18 on: January 22, 2017, 04:28:36 PM »
Outside of my house and ETFs, Netflix is almost 4% of my investment portfolio.  Bought it back in 2010 and it's increased by 852%.

852%! Holy crap. However much Netflix you bought, I'll bet you wish you had bought a whole lot more.

Have had a few home runs like Netflix but also my fair share of duds.  I haven't bought individual stocks in years, pretty much all ETFs now.

I don't buy individual stocks either.

I wish I had made an exception for Bitcoin. If I had bought $100 worth when I first heard about it, it would be worth over $300k today. I figured it was just one more way to separate a fool from his money. And who knows? It may yet turn out that way.

Heckler

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Re: What is your most concentrated investment(s)?
« Reply #19 on: January 22, 2017, 10:05:03 PM »
Paid off townhouse that has more than doubled in value in the thirteen years it took to pay it off.  Makes up 60 to 70% of NW. 

Bones81

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Re: What is your most concentrated investment(s)?
« Reply #20 on: January 22, 2017, 10:44:54 PM »
Outside of my house and ETFs, Netflix is almost 4% of my investment portfolio.  Bought it back in 2010 and it's increased by 852%.

852%! Holy crap. However much Netflix you bought, I'll bet you wish you had bought a whole lot more.

I agree, nice job on the Netfix pick! You only need a couple of similar ideas in your lifetime to play out and you're set.  Sounds like initial investment was relatively modest if it still only totals 4% of net worth.  Assuming it continues rising over time (which I expect this is a great stock to hold onto) what level of your net worth in Netflix would you be comfortable with?

I believe my initial investment was ~$2-$3k.  I diversified across a lot of them so I didn't put all my money on one pony.  While I haven' bought an individual stock in a few years, I'm tempted to put more money into Netflix and Nvidia (also a big winner for me), so I'm comfortable with them being a higher % of my net worth.  I probably wouldn't let an individual stock be more than 10% of my total net worth.  I don't place bets that big, so if it happens, it's because they really appreciated in value, so it's a good problem to have. 

2Birds1Stone

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Re: What is your most concentrated investment(s)?
« Reply #21 on: January 23, 2017, 07:00:51 AM »
If you don't count index funds? Cash

BussoV6

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Re: What is your most concentrated investment(s)?
« Reply #22 on: January 23, 2017, 07:20:35 AM »
When metal prices tanked last year, in March I bought two different mining shares. Started offloading some of them, but a few weeks ago, Freeport and Anglo-American were each approx 12% of my portfolio.

bugbaby

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Re: What is your most concentrated investment(s)?
« Reply #23 on: January 23, 2017, 09:07:48 PM »
Outside of my house and ETFs, Netflix is almost 4% of my investment portfolio.  Bought it back in 2010 and it's increased by 852%.

852%! Holy crap. However much Netflix you bought, I'll bet you wish you had bought a whole lot more.

I agree, nice job on the Netfix pick! You only need a couple of similar ideas in your lifetime to play out and you're set.  Sounds like initial investment was relatively modest if it still only totals 4% of net worth.  Assuming it continues rising over time (which I expect this is a great stock to hold onto) what level of your net worth in Netflix would you be comfortable with?

I believe my initial investment was ~$2-$3k.  I diversified across a lot of them so I didn't put all my money on one pony.  While I haven' bought an individual stock in a few years, I'm tempted to put more money into Netflix and Nvidia (also a big winner for me), so I'm comfortable with them being a higher % of my net worth.  I probably wouldn't let an individual stock be more than 10% of my total net worth.  I don't place bets that big, so if it happens, it's because they really appreciated in value, so it's a good problem to have.
Just out of curiosity, at what point if ever would you sell some or all of your Netflix holdings?

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maizefolk

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Re: What is your most concentrated investment(s)?
« Reply #24 on: January 23, 2017, 09:15:47 PM »
Equity stakes in two start ups. If you go off the the valuations one has raised money at, my equity in it would be worth more than my entire stash at the moment. Of course I cannot sell it, it throws off no dividends, and even in the best case scenario neither of those things would change until years after I hope to be FIRE, so I don't consider it.

Bones81

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Re: What is your most concentrated investment(s)?
« Reply #25 on: January 23, 2017, 09:50:38 PM »
Outside of my house and ETFs, Netflix is almost 4% of my investment portfolio.  Bought it back in 2010 and it's increased by 852%.

852%! Holy crap. However much Netflix you bought, I'll bet you wish you had bought a whole lot more.

I agree, nice job on the Netfix pick! You only need a couple of similar ideas in your lifetime to play out and you're set.  Sounds like initial investment was relatively modest if it still only totals 4% of net worth.  Assuming it continues rising over time (which I expect this is a great stock to hold onto) what level of your net worth in Netflix would you be comfortable with?

I believe my initial investment was ~$2-$3k.  I diversified across a lot of them so I didn't put all my money on one pony.  While I haven' bought an individual stock in a few years, I'm tempted to put more money into Netflix and Nvidia (also a big winner for me), so I'm comfortable with them being a higher % of my net worth.  I probably wouldn't let an individual stock be more than 10% of my total net worth.  I don't place bets that big, so if it happens, it's because they really appreciated in value, so it's a good problem to have.
Just out of curiosity, at what point if ever would you sell some or all of your Netflix holdings?

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Perhaps if the consensus equity analyst view started to sour on it but right now a lot of them still think there is upside, so I'll continue to hold.  I'd also look to sell a bit and reinvest in my ETFs if it became too much of my overall holdings (like over 10%).