AMZN dropped 90% after the Dot Com Bubble burst. TSLA in the last five years:
> In the past 5 years, there were drawdowns of 30%, 50%, -60% and -35%. This stock was down 60% in 2020! It’s up a cool 1000%+ since then.
> And the crazy thing is there were plenty of Tesla shareholders who did hold on for the entire ride. They were true believers in the face of relentless negativity about the company and its founder.
Do you have the mental fortitude to hang on during those times? How do you know when you're wrong?
> The first has to do with stock picking. Mr. Housel points out that most public companies are duds, a few do well, and a handful become extraordinary winners that drive the vast majority of the stock market’s returns. He cites data from the Russell 3000 Index that shows, since 1980, forty percent of all Russell 3000 stock components lost at least 70% of their value and never recovered.
When do you know when a stock you've pick that used to be good stops being good? IBM, AT&T, and GM were in the Top 10 of companies on the S&P 500 for decades: how are they doing now? How do you know when to jump ship?
AAPL didn't do very well in the 1990s: when would have dropped them? When should you have picked them up? (After the (in)famous Microsoft investment perhaps?)
Further, just because investing in a company on its way up may be give you good returns, does that still apply once it is at the top?
> But as massive as these behemoths became, that has not necessarily made them good long-term investments. For each decade starting 1930, 1940, 1950, and so on through 2010, the 10 largest companies at the start of the decade have made up, on average, 23.6% of the U.S. stock market. But, in the decade that followed, the average annual return of those 10 largest companies has trailed the market by an annualized 1.51% on average.
* https://www.pwlcapital.com/investing-technological-revolutio...
* https://en.wikipedia.org/wiki/Technological_Revolutions_and_...
AMZN dropped 90% after the Dot Com Bubble burst. TSLA in the last five years:
> In the past 5 years, there were drawdowns of 30%, 50%, -60% and -35%. This stock was down 60% in 2020! It’s up a cool 1000%+ since then.
> And the crazy thing is there were plenty of Tesla shareholders who did hold on for the entire ride. They were true believers in the face of relentless negativity about the company and its founder.
> Kudos to them.
* https://awealthofcommonsense.com/2021/10/the-10-most-dangero...
Do you have the mental fortitude to hang on during those times? How do you know when you're wrong?
> The first has to do with stock picking. Mr. Housel points out that most public companies are duds, a few do well, and a handful become extraordinary winners that drive the vast majority of the stock market’s returns. He cites data from the Russell 3000 Index that shows, since 1980, forty percent of all Russell 3000 stock components lost at least 70% of their value and never recovered.
* https://boomerandecho.com/weekend-reading-the-psychology-of-...
* Housel's book: https://www.goodreads.com/en/book/show/41881472-the-psycholo...
* https://awealthofcommonsense.com/2014/09/stocks-dont-come-ba...
FAANG may be great stocks—right now. But there are plenty of stocks that used to be great as well:
> Exxon Mobil replaced by a software stock after 92 years in the Dow is a ‘sign of the times’
* https://www.cnbc.com/2020/08/25/exxon-mobil-replaced-by-a-so...
When do you know when a stock you've pick that used to be good stops being good? IBM, AT&T, and GM were in the Top 10 of companies on the S&P 500 for decades: how are they doing now? How do you know when to jump ship?
* https://www.dimensional.com/us-en/insights/large-and-in-char...
AAPL didn't do very well in the 1990s: when would have dropped them? When should you have picked them up? (After the (in)famous Microsoft investment perhaps?)
Further, just because investing in a company on its way up may be give you good returns, does that still apply once it is at the top?
> But as massive as these behemoths became, that has not necessarily made them good long-term investments. For each decade starting 1930, 1940, 1950, and so on through 2010, the 10 largest companies at the start of the decade have made up, on average, 23.6% of the U.S. stock market. But, in the decade that followed, the average annual return of those 10 largest companies has trailed the market by an annualized 1.51% on average.
* https://www.pwlcapital.com/are-the-largest-large-cap-growth-...
Investing in the "top companies" was a fad in the past—and returns weren't necessary that good over the long-term:
* https://en.wikipedia.org/wiki/Nifty_Fifty
Owning the best stocks is hard:
* https://awealthofcommonsense.com/2021/03/owning-the-best-sto...