Best Ideas portfolio (with Josh and Michael)

The Compound and Friends

Josh Brown

Investing, Business News, News, Business

4.7 • 2.2K Ratings

🗓️ 5 April 2019

⏱️ 7 minutes

🔗️ Recording | iTunes | RSS

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Summary

In a recent study, Vanguard took a look at the last 30 years worth of data for the Russell 3000 index, which represents the total stock market. They found something remarkable - over the last 30 years, 47% of stocks were unprofitable investments and almost 30% lost more than half their value. They also found, and this is the big one, that 7% of stocks had cumulative returns over 1,000%. But imagine how hard it would have been to identify that winning 7% and concentrate only on those holdings in advance? In his recent post, Michael Batnick takes Vanguard's data and looks at the long-term risk of trying to only hold a small amount of stocks, even if you have the conviction that they are the right stocks. Diversification has a much better track record than randomized collections of larger positions. What are the ramifications of this for portfolio construction? How about investment advice? Michael and Downtown Josh Brown sort it all out in a brand new Live from the Compound. Read Michael's post here and see the charts for yourself: https://theirrelevantinvestor.com/2019/03/25/how-concentration-affects-portfolio-performance/ Enable our Alexa skill here - "Alexa, play the Compound show!" https://www.amazon.com/Ritholtz-Wealth-Management-LLC-Compound/dp/B07P777QBZ Talk to us about your portfolio or financial plan here: http://ritholtzwealth.com/ Obviously nothing on this channel should be considered as personalized financial advice just for you or a solicitation to buy or sell any securities. Please see this 3,000 word terms & conditions disclaimer if you seriously need this spelled out for you. https://thereformedbroker.com/terms-and-conditions/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Hi, I'm Josh Brown. Welcome to Live from the Compound.
0:03.0	Are you like most people under the impression that it's easy to pick stocks outperform the market if you just get the right companies and own enough of them and hold on for long enough.
0:12.6	Whose stick is this?
0:14.0	Why can't I just...
0:15.0	And...
0:16.0	All right.
0:17.0	I'm here with Michael Batnick.
0:18.4	We're going to talk about concentrated portfolios, the agony and the ecstasy of concentrated portfolios and I think you can learn a
0:24.9	couple of really important things. Mike your post about concentrated
0:29.0	portfolios you're looking at this idea that you can just focus on buying the best stocks, the highest quality stocks, and potentially if you give it a long enough period of time, outper the index but the work that you're referencing
0:45.4	actually shows the opposite and the more stocks you own the more of a chance you have to beat the index.
0:51.3	Doesn't that seem counterintuitive?
0:53.0	Yeah, maybe. Well let me tell you this.
0:57.0	Stanley Druck Miller, one of the, if not the greatest money manager of all time, said,
1:02.0	I think diversification and all the stuff
1:04.6	they're teaching at business school today is probably the most misguided concept everywhere
1:08.3	diversification is misguided the first thing I heard when I got in the business was balls make money, bears make money and pigs got slaughtered. I'm here to tell you I was a pig.
1:16.0	Baa blah blah. Okay. So I think that that quote is like used all the time.
1:21.0	Right. Oh, the pigs get slaughtered slaughtered and just like why diversification is
1:25.0	bunk and how Druckin Miller you know the greatest didn't believe in it. But why is
1:28.9	diversification being a pig? I don't understand I don't understand the
1:31.7	connection. He's basically saying like why if you have your best ideas you should only own those why would you own your 21st best stock? I mean
	...

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