Should You Put All Of Your Eggs In One Basket?

The Juice loves receiving feedback and insight from subscribers. So, please feel free to use the link at the bottom of this email to send us a note. 

In today and tomorrow’s Juice we’re featuring a couple subscriber comments because they’re thought-provoking and they help advance 2024’s main theme — retirement. 

Today’s submission comes from Jeff G, whose comment likely will resonate with more than a few readers: 

Your comments on “putting all your eggs in one basket” (12/28/23 posting) rang very loudly with me. I have a family member who moved his entire portfolio to AAPL stock back in 2009. He is a big believer in investing in good, strong companies and staying the course. He had subscribed to a few newsletters over the years and he had some investments, which had performed well, but one day he just decided to go all in with AAPL…..and that’s what he did.

He’s up in age at this point and growth is no longer what he needs from his capital so he and I recently executed a plan to liquidate most of his AAPL holdings. In December, we sold off 41,000+ shares of AAPL at prices of $193 or better. You can do the math to get an approximation of his proceeds (the vast majority of this was in IRAs so no cap gains taxes – whew!). His average annual percent return across the accounts where he held those shares…..20.83%! Impressive to say the least. For the past 14 years he has owned two investments – shares of AAPL, and a money market account for his loose cash.

No professional advisor in the world would have recommended such a course of action, but it has certainly worked out for he and his family.

Wow!

41,000 shares X $193 per share = more than $7.9 million. 

Sounds like a tall tale, but, to the point of this resonating, how many people do you think — over the last 10 or 20 years — have said screw it and gone all-in on a big stock, such as Apple or one of the others that populates today’s Trackstar top five of the technology names investors search for most across our 100+ financial media partners?

Here’s some of what we said in the 12/28 Juice — Redefining Retirement In 2024 —that Jeff referred to:

There are the people who five years ago — maybe longer — looked at a company like Tesla (TSLA) and said, I believe. They went against the investing lesson of don’t put all your eggs in one basket and put their eggs all in one basket. 

If five years or so ago, you somehow threw together $100,000 and put it all in TSLA stock, you would have more than $1.1 million today. 

The Juice knows a handful more who did it with a lesser publicized stock — Sirius XM (SIRI). We were on the message boards way back around 2008 when these ardent SIRI longs were gobbling up shares for under $1.00. Sometimes as low as $0.10, $0.20 or $0.30 a share. Every time the stock dropped, they bought more. Some of these people cashed out for mid-to-high six and sometimes low seven figures. No joke.

In 2009, Apple (AAPL) traded for less than $10 per share. This is roughly 7-8 years after Steve Jobs introduced the world to the iPod and 2 years or so after Apple trounced BlackBerry once and for all when it released the iPhone. So it’s not completely crazy to think some risk takers went all-in AAPL nearly 15 years ago. 

Here’s a look at where the other Trackstar tech stocks traded (approximately) at the end of 2009 and where they trade today: 

In every single case — and we can come up with countless others, especially in tech — would have sealed the deal on more than a few retirements if you went all-in, or even close to it, on these names. 

So, then, what’s wrong with putting your eggs all in one basket? 

And because The Juice doesn’t like to insult your intelligence, we’ll go beyond the whole, painfully obvious diversification argument. If one of your holdings underperforms or crashes, you want other areas of your portfolio to offset your downside. Sort of a flimsy argument when you look in the rear view mirror like this. So you held a bond fund or some shit just in case Apple faltered or went out of business? Much of this concern about being all-in on just one or a few stocks stems from the hysteria around people having their entire 401(k)s in, say, Enron, which collapsed. 

Valid concern, but, here again, it’s obvious, only scratches the surface and doesn’t hold up to historical results. 

As we see it, the bigger issue is related to, but deeper than past performance isn’t necessarily indicative of future results. The mutual fund and ETF companies have to say this when touting their historical performance. Because, while nobody has a problem with you putting most or even all of your money in the S&P 500, there’s a chance it could produce negative returns for the next 20 years, even though it’s up roughly 325% over the last 20. 

The problem we have with all your eggs in one basket investing is easy to explain, but rarely talked about. 

• Even if history repeats itself, you have no idea how you’ll act and react over time as a stock you own crushes it or has volatile periods of downside. 
• On February 7, 2020, AAPL traded for $80.01. 
• On March 20, 2020, AAPL traded for $57.31.
• That’s a 28.4% drop in just over a month. 
• Would you have stuck it out? Maybe bought more? 
• Or would you have gotten spooked and taken some profits. 
• On a significant upside, would you taken profits, thinking this thing can’t possibly go higher?

We just cherry picked that drop in AAPL, but there are countless other examples in Apple and other, more volatile names. 

So it’s super easy to look back and be like, damn if I had only put everything in Apple 10 years ago. But would you have just sat there emotionless for the last 10 years through all the ups, downs and concerns people have about the company?

Probably not. 

The Bottom Line: In the rear view mirror, history happens in a neat, often straight line. It helps that the stock market has largely crushed it in recent times. This view of the landscape makes investing seem easy and investors who haven’t gotten rich feel dumb. 

But resist that urge. Don’t try to make the history you see so clearly now a future that’s impossible to predict. Because, ultimately, it’s less about what the market or this or that stock will do and more about what you will do with a position at various moments in time without the benefit of a crystal ball. 

All of this said, by all means, go overweight your favorite names, but don’t do it at the expense of keeping the money you’re counting on down the road in a well-rounded group of ETFs and stocks that, while maybe aggressive, don’t overexpose you to one particular company or segment of the stock market.

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