A reader sent me this email recently:
Dude, your net worth has gone up crazy high in a short amount of time. Are you making this stuff up?
Nope, it’s all true.
Big Tech Tantrums
2020 has been a hell of a year for the portfolio. We’re up about $600,000. and last Thursday, our net worth touched $3,000,000 for the first time.
Coincidentally, I was listening to the Animal Spirits podcast which explained one of the factors that got us there:
If you’re going to pick a handful of individual stocks that are going to be grand slams, it’s going to be qualitative, not quantitative that gets you there.–Ben Carlson
Stock Speculation, Awesome Appreciation, And Careful Consternation
I’ve done really well with stocks. Here is a snapshot of some of my holdings:
I could tell you why I bought each of these stocks in one sentence:
- Amazon: Online shopping and outsourced computing (AWS) are the future and Amazon is the leader.
- Facebook: Facebook will successfully migrate to mobile and will successfully monetize the platform. (In 2012, Facebook was a desktop platform and the site was barely monetized)
- Tesla: Electric cars are the future and Elon Musk is the human who can lead the revolution.
Note that I said nothing about valuations, earnings, profits, or dividends. My thoughts were qualitative only.
Qualitative strategy is the opposite of an investor like DGI (Divident Growth Investor).
- DGI looks at numbers. I look at broad trends.
- DGI is looking for potential dividend increases. I’m looking at the potential for growth.
- DGI is betting on the status quo. I’m betting on disruption.
Before you dividend-heads jump all over me, I’m not saying that his approach is wrong. DGI sleeps better with cash-flow. I sleep better with speculative growth.
And The Problem
Attentive readers may have figured out one flaw in my strategy. There was a clue in the caption of my eTrade account screen capture above:
I purchased almost all of these in 2012.
I purchased these stocks 8 years ago. Almost all stock market investments since then have been index funds. Why? The answer is simple:
I haven’t felt strongly about any individual company since then.
If you asked me what stock to buy today, I’d tell you to buy all of them. AKA VTSAX. Massive growth just isn’t easily repeatable. My obsession with tech gave me some good ideas that I acted upon. I haven’t had another good idea in 8 years.
I also question staying power. Amazon, Facebook, and Tesla are all juggernauts now, but I wouldn’t be at all surprised if one of them is gone by 2040. Microsoft or Google could destroy Amazon’s cash cow, AWS. A hipper social network will destroy Facebook. Most major auto manufacturers are gunning for Tesla with their own electric car lineups. Or maybe Uncle Sam will break them up.
No empire lasts forever. The same disruption that helped make me a paper multi-millionaire will eventually kill my cash cows.
My juggernauts will turn into jugger-nots. (I’m such a jargonaut)
Enough jabberwockery! Go buy an index fund.
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