Portfolio diversification

[Buckminster]

Thread to share your portfolio and discuss what % of TSLA is appropriate and where to put your non Tesla money to work.

Please do not introduce new stock suggestions here. They should be discussed here:
What other tech stock to consider?

 

[Favguy]

We have no debt now and a cash buffer that will allow us to live well for 4 years and ride out unfavourable market movements. This cash is mainly in high interest (oxymoron, I know!) bearing savings accounts.

The rest of our money is still 100% in TSLA. I don't personally see any valid arguments for diversifying at all his time.

At the amount we have, It does seem to be the norm for many at this point to diversify into residential property ownership and letting. I did consider this, but it doesn't sit well with my political and ethical attitude to life.

 

[dakh]

I started a similar thread some time back and it didn't get much traction portfolio management/diversification

Since posting that thread I have gotten more and more convinced in Ray Dalio's advice. Since I transitioned from reckless risk-taking (by common investment standards) to actual portfolio management, my goal is capital preservation first and growth second. "Diversify across many non-correlated assets" is the name of the game. I won't touch stuff that doesn't at least promise some reasonable yield (i.e. I won't hold bonds or dollars). If I have multiple non or weakly correlated assets where average return is over 4%, I'm good.

To that extent so far I am diversifying across asset classes and geographies. To me most of the Western world's economy is a strongly correlated asset, so I'm putting money into China and rest of the world via EEM, FSGGX, FLCH, VWO. For real estate I'm liking STWD a lot, it throws off 10% dividend and I think has a good chance of principal appreciation since it got hit pretty hard last March. 10% in GLD, 10% in GBTC and ETHE as "schmuck insurance", although I think this isn't quite the time for it but I want to be prepared already. Growth stocks via ARK* funds. BRKB for "balance sheet investments".

Next thing on my list is to see what's a good way to get some portion of the portfolio completely decoupled from dollar. BTC and GLD is good but I'd like to probably have some basket of currencies if that's possible. Haven't started looking into this yet though.

 

[TheTalkingMule]

Don't we already have a TSLA options thread?

 

[dakh]

Don't we already have a TSLA options thread?

Huh? Is that your way to diversify out of TSLA, to start trading TSLA options?

 

[Buckminster]

I am currently 95% TSLA LEAPS. Looking to diversify in June. I am diversifying because I have more to lose than to gain. What do you think of the following?


3% Bitcoin on Coinbase

3% LMND
3% AMZN
3% BRK - almost 50% AAPL
10% Bailie Gifford US growth - for the SpaceX content...

1% in following
ABNB
Unity
Salesforce
Palantir
TDOC
NFLX
Square
Redfin

<1% in approx 30 other high risk stocks including miners and Chamath’s IPOs. This is in addition to 20 or so that I have now.

50-60% TSLA
Including 5% in 500 strike LEAPS

Negatives:
Not enough TSLA..
90% US stocks
95% Tech

 

[adiggs]

Huh? Is that your way to diversify out of TSLA, to start trading TSLA options?

Yes! (kidding - though that really is what I'm doing).

One particular thing I've done, and should do a lot more - I found a company called Fundrise a year or two back. They are a private REIT organization that has been delivering me a 2% quarterly check consistently since I invested in the income fund.
https://fundrise.com

I'm currently around 1% here, and this is all of the real estate exposure I have. I've been thinking that 20-25% would be better and provide a decent counterbalance for the rest of the portfolio. And besides, 6-8% on $1M is $60-80k/year (ignores the 1-4% capital appreciation that has been going on at the same time). That's a decent retirement all on it's own.


I've wanted some real estate diversification. I don't count the equity in my house (it reduces expenses, it doesn't increase assets; can only count it on one side of the ledger or the other). And I REALLY don't want to buy and manage individual properties myself. Just .. no.

Redemptions can be restricted or even suspended - it's private rather than publicly traded - but for a long term real estate investment (which is what it is, isn't it), this has been working great for me.

 

[adiggs]

I am currently 95% TSLA LEAPS. Looking to diversify in June. I am diversifying because I have more to lose than to gain. What do you think of the following?


3% Bitcoin on Coinbase

3% LMND
3% AMZN
3% BRK - almost 50% AAPL
10% Bailie Gifford US growth - for the SpaceX content...

1% in following
ABNB
Unity
Salesforce
Palantir
TDOC
NFLX
Square
Redfin

<1% in approx 30 other high risk stocks including miners and Chamath’s IPOs. This is in addition to 20 or so that I have now.

50-60% TSLA
Including 5% in 500 strike LEAPS

Negatives:
Not enough TSLA..
90% US stocks
95% Tech

My own view on a basket of stock such as you're describing is that whenever I think about selling some TSLA to buy something else, I quickly conclude that I'm selling high quality for lower quality, and stop there . That isn't necessarily a good choice, but that's what I think. That doesn't mean that there aren't good alternative to TSLA - only that I'm not investing energy to find them.

Broadly speaking, I would tend towards something in the ARK universe for outside of my TSLA position, while also realize that these are all public companies (correlated on that basis) and I think all US companies (correlated to the US economy). More specifically, probably something around genomics /biotech. I don't need more TSLA or industrial economy exposure, and I've done enough research to have a taste of some of the amazing stuff happening in genomics / biotech. Probably not markets with TAM on par with the markets Tesla is entering, but still huge by any rational standard.


I don't know where you're at - still growing into retirement, or income in retirement. In retirement at least, I would shift some to real estate (historically uncorrelated). The financial advisors will tell you bonds are good diversification - with interest rates so low, I'm content to be roughly 50/50 cash/TSLA (while selling options to generate income).

 

[dakh]

Yes! (kidding - though that really is what I'm doing).

One particular thing I've done, and should do a lot more - I found a company called Fundrise a year or two back. They are a private REIT organization that has been delivering me a 2% quarterly check consistently since I invested in the income fund.
https://fundrise.com

I'm currently around 1% here, and this is all of the real estate exposure I have. I've been thinking that 20-25% would be better and provide a decent counterbalance for the rest of the portfolio. And besides, 6-8% on $1M is $60-80k/year (ignores the 1-4% capital appreciation that has been going on at the same time). That's a decent retirement all on it's own.


I've wanted some real estate diversification. I don't count the equity in my house (it reduces expenses, it doesn't increase assets; can only count it on one side of the ledger or the other). And I REALLY don't want to buy and manage individual properties myself. Just .. no.

Redemptions can be restricted or even suspended - it's private rather than publicly traded - but for a long term real estate investment (which is what it is, isn't it), this has been working great for me.

Thanks for the tip on https://fundrise.com/ . I read some of their materials and I'm going to get into it. I learned very little about REIT space so far, on the surface it looks like you're essentially paying for experts to pick properties for you and handle all the paperwork and management. Or in mREIT you're also hiring financial experts to do the lending on your behalf. STWD that I mention above for example is effectively a top notch operation in mREIT, kinda like ARK is for tech growth stock picking. The value prop of Fundrise is low expenses and their value approach to picking investment properties. A big portion of that is rentals. All good so far. I don't quite understand how is this made a liquid investment, probably some technicality. One disturbing aspect is they have an option of blocking all redemptions, so it is not 100% liquid. And there are redemption penalties if invested for less than 5 years.

So I think a combo of STWD and fundrise has decent coverage of various real estate types, with one big down side is that this is all US based. Next step is to find where to invest for exposure to international real estate.

 

[adiggs]

Thanks for the tip on https://fundrise.com/ . I read some of their materials and I'm going to get into it. I learned very little about REIT space so far, on the surface it looks like you're essentially paying for experts to pick properties for you and handle all the paperwork and management. Or in mREIT you're also hiring financial experts to do the lending on your behalf. STWD that I mention above for example is effectively a top notch operation in mREIT, kinda like ARK is for tech growth stock picking. The value prop of Fundrise is low expenses and their value approach to picking investment properties. A big portion of that is rentals. All good so far. I don't quite understand how is this made a liquid investment, probably some technicality. One disturbing aspect is they have an option of blocking all redemptions, so it is not 100% liquid. And there are redemption penalties if invested for less than 5 years.

So I think a combo of STWD and fundrise has decent coverage of various real estate types, with one big down side is that this is all US based. Next step is to find where to invest for exposure to international real estate.

Part of the low expenses with Fundrise is that they aren't a publicly traded REIT. I think I found something on their site indicating that something like 2-4 points of return each year goes into expenses and stuff related to being publicly traded. They also brag about how their technology platform lowers all sorts of real estate, investor acquisition, and other stuff related to doing what they do. I cheerfully admit I don't see it that clearly, but I'm in tech - not real estate - so some of the stuff they gush over may just be 10 year old technology to the tech industry.

Anyway, that's what it means to be private - reduced liquidity and much lower reporting requirements.


And one element of the investment, and part of the deal, designed to make the business as conservative and profitable for all investors is the redemption suspension. They actually activated that clause, I think for the first time ever, when the pandemic first hit and there was so much uncertainty. They restarted redemptions in July or August or so.

In the different portfolios, you'll find everything from buy and manage properties, to construction lending, to .. a variety of different real estate related activities. With a focus on the large apartment complexes - seems like people want a place to stay no matter what. Not much commercial real estate.

My take - invest with money that you'd otherwise use for generating dividends, and that you'd like to stay invested for years (not months).

 

[dakh]

Part of the low expenses with Fundrise is that they aren't a publicly traded REIT. I think I found something on their site indicating that something like 2-4 points of return each year goes into expenses and stuff related to being publicly traded. They also brag about how their technology platform lowers all sorts of real estate, investor acquisition, and other stuff related to doing what they do. I cheerfully admit I don't see it that clearly, but I'm in tech - not real estate - so some of the stuff they gush over may just be 10 year old technology to the tech industry.

Anyway, that's what it means to be private - reduced liquidity and much lower reporting requirements.


And one element of the investment, and part of the deal, designed to make the business as conservative and profitable for all investors is the redemption suspension. They actually activated that clause, I think for the first time ever, when the pandemic first hit and there was so much uncertainty. They restarted redemptions in July or August or so.

In the different portfolios, you'll find everything from buy and manage properties, to construction lending, to .. a variety of different real estate related activities. With a focus on the large apartment complexes - seems like people want a place to stay no matter what. Not much commercial real estate.

My take - invest with money that you'd otherwise use for generating dividends, and that you'd like to stay invested for years (not months).

Yes so unlike the stock market, there's no mechanism to ensure liquidity. I still am a bit unsatisfied with how they explain how they value the shares you buy. Who is determining the current price of all the properties you're invested into? They would be incentivized to provide inflated valuations to make themselves look better to future customers, and deflated valuations for the people who already bought in and want out.

 

[Xepa777]

I'm not a fan of ETFs for diversification because there's so much junk in there (ARK is a much better model but we don't know how it'll hold up in downturns).

There's a couple of different types of diversification that can still leverage our investor profiles / accumulated knowledge.

Total asset class diversification (but still disruptive): Bitcoin/Ethereum. Great summary for Bitcoin investment from Winklevoss Twins HERE

Total asset class diversification (standard): Silver. We know green tech will be huge and silver is a scarce material used in many of those applications. As Tesla/green tech investors we know this.

Tech stock, different industry (disruptive): Square. Ark Invest great whitepaper on Square - HERE

Tech stock, same industry (disruptive): ABML. Battery recycling from ex-Tesla PhD engineers. Leverages our knowledge of Tesla/industry, but diversified as different part of supply chain. Research DD link HERE

Non-tech stock (disruptive): Twist Biosciences. Synthetic DNA is huge in all therapeutics as a platform play.

Total asset diversification (high potential): Starter homes near the Austin Gigafactory (my mom has bought 2 houses super close to Gigafactory that have appreciated >60% since the summer). We're in the process of possibly getting a third property. The incredible economic growth in that area makes it almost recession resistant because of the high paying labor that will be there. This also leverages our knowledge of Tesla. Even if the company plateaus this decade, the Texas factory will definitely house their operations.

This is just my (+family)'s portfolio. Hope it gives a good idea of creating diversification while still leveraging information advantages we have from our life experiences.

 

[MXWing]

1% BITCOIN
1% GME
1% BB

If you want some spice in your portfolio, this is how it gets done!

 

[MXWing]

1% BITCOIN
1% GME
1% BB

If you want some spice in your portfolio, this is how it gets done!

My 3 stock suggest outperformed TSLA, QQQ, S&P and probably INTC.

 

[jhm]

Over the last year I've worked hare to diversify my active portfolio (excludes 401k where I have limited menu of mutual funds). Currently TSLA is about 1/3 of my active portfolio.

Solar is my next biggest block about 1/5 of my active. This includes SPWR, MAXN, ENPH, SEGD, and HASI. As a group these have performed about as well as Tesla. So I don't feel like I'm giving up on much growth opportunity in Tesla by diversifying into this area.

HASI is an interesting REIT and solid dividend payer that invests in solar, wind and other sustainable infrastructure. Inspite of being an income investment, the stock price has been growing like crazy. I suspect there is an unmet appetite amongst income investors for renewable energy assets.

The next group is ARKK, ARKG and TDOC. I like what ARK is doing, but I do wonder if I may as well just take their stock picks as a suggestion and invest directly in a few of them. I've been very happy with TDOC. I can let it run faster than ARKG (which also contains TDOC), and I don't have to pay ARK 0.75% to hold it for me. Some have been critical of ARK for limiting their positions in stocks like Tesla to about 10% of the fund. But if you really want more exposure than that, you may do well to hold the single name stock directly. (Granted some people are not allowed by employers to hold single name stocks.) So that is what I want to do with ARK. Use it like a little stock sampler pack, and buy an overweight position where I find something interesting. I've considered SQ, but honestly as someone who works in banking I do see how what they are doing is terribly interesting. The performance of this group is pretty good, but not as dynamic as solar or Tesla.

Finally, I hold a few conventional stocks like DIS, AAPL, AMZN, and even WM. I've got an emotional attachment to Disney that I can't quite shake as an investory, but it really is a fine business with an ambitious media franchise acquisition appetite, streaming, and many other ways to monetize franchise value. Its park and vacation line will recover post Covid-19. So lately it's been a solid performer. But generally, I use stocks in this group to hold value. I'm happy to sell off a few shares of AMZN to seize on price weakness in TSLA or other high growth stock.

So yes, I do continue to accumulate Tesla whenever value of my position drops. I recently bought a few shares around $811. But I also trim off a few shares when Tesla pushes above about 1/3 of my active portfolio. My high flying solar stocks and TDOC are also quite volatile. I find that I do well to trim back when they surge ahead to too much share of my portfolio, and accumulate more when they shrink. So I'm taking advantage of volatility, while allowing the dollar value of all my positions grow over time. Each day I sort my stocks by value of their position and I think about which ones I want to build up and which do I want to trim. I like doing relatively small trades, typically around 0.10% of my portfolio value. This is enough to keep my portfolio groomed and to be actively thinking through the tradeoffs. If I want to buy something I have to think, do I want it badly to trim back something else? Is TSLA at $840 such a good deal that I want to sell off SPWR which has surging ahead double digits for the last couple of days? Or am I better off letting SPWR keep running? Both are terrific performers and I want to be able to seize on any price weakness. I like to stay active and engaged.

Best of luck whatever your portfolio approach may be! Cheers!

 

[jhm]

Forgot to mention as of close last week my portfolio is up 22.65% YTD, but Tesla only up 16%. Maybe this week Tesla will stop holding my portfolio back!

 

[Featsbeyond50]

Forgot to mention as of close last week my portfolio is up 22.65% YTD, but Tesla only up 16%. Maybe this week Tesla will stop holding my portfolio back!

TSLA is up 24.82% YTD not 16% so your other holdings are actually the anchor. My account, on the other hand, is up 26.58% YTD so the other scraps I own are being allowed to stick around.

 

[jhm]

TSLA is up 24.82% YTD not 16% so your other holdings are actually the anchor. My account, on the other hand, is up 26.58% YTD so the other scraps I own are being allowed to stick around.

Not quite. Friday's close was $864.64, 12/31/2020 was $705.67. So Tesla was just up 20.00% when my portfolio was up 22.65%. (I had lifted 16% from a nasdaq.com chart, not so reliable.)

Today, Tesla, up 24.82% YTD surges ahead of my portfolio languishing at 24.48%.

TDOC led my portfolio, up 9.16% today. MAXN was down 7.51%, but MAXN is just volatile like that being a very new stock.

 

[Oveeus]

IMO, diversification is a bad idea when you diversify for the sake of diversifying.

I have friends who have tens of stocks in his portfolio... and that's way too much. There's no freaking way you can study them well enough to make informed decisions if you are not doing it full time.

Peter Lynch said it best. Diversification is deworsification. Like playing roulette, you hope that by betting at many, one will come out as a winner.

What you need to do instead is to check if there are other companies in different fields... fields that will also have great impacts, or put it simply per Lynch, their "story". And you pick in different fields because you want to go beyond energy (in the case of TSLA), and want to look into genomes, retail, real estate... that provide you a different market to make money from.

But still, you need to be constantly checking to see how they are doing. If they are on track and executing, leave it. If they are deviating from the original story you believe, move away.

 

[jhm]

Today, Tesla, up 24.82% YTD surges ahead of my portfolio languishing at 24.48%.

It's been a tough week on my portfolio. YTD, portfolio up 14.73%, Tesla up 12.45%.

Naturally, diversification is expected to defend against declines. So perhaps it is not much of surprise that my portfolio would pull ahead of Tesla this week.

But truly my motivation for diversification is both aggressive and defensive. This week I've been selling off most of my AAPL and AMZN. They have not been holding value very well, and I don't expect them to outperform Tesla and other high performers in my portfolio. So I'm cashing in these two stock to buy higher growth stocks while prices are down. Hopefully buying the dip this week will pay off in the coming weeks.

I have no idea how long it will take for sunnier days to arrive, but either way I'm prepared to ride it out. I would prefer this GME/WSB/RH situation to settle down. While I'm all in favor of retail investors rising up against short-selling hedge funds, I don't believe this gamesmanship is good for investor confidence. Major market indexes were down about 2% today. Money could be waiting on the sideline waiting for things to settle down. And for stocks like Tesla, it is not helpful for RH to halt trading in all stocks. We'll see how long it takes for the crazy to settle down.

Good luck next week!