A Blogger's Individual Stock Portfolio Revealed

A few months ago, I shared my actual stock portfolio on a blog post. Not surprisingly, it is composed entirely of index funds with no individual stock holdings. This is not surprising because that is exactly the plan detailed in my written financial plan, including its most recent updated iteration.

In today’s PhREI network post, Daniel Shin AKA The Darwinian Doctor shares a portion of his stock portfolio as well. However, he shares the portion that includes just individual stocks (Insert surprised face emoji)! His rationale, experience, and ultimate conclusions are really interesting and, as always, well though out.

Enjoy. Take it away Daniel!

Index funds

When it comes to stocks, most thought leaders in the personal finance world agree that diversified index funds are the best way to invest in the stock market. A great example is VTSAX, which is the Vanguard total stock market index fund.

By owning a share of VTSAX, you own a little bit of thousands of companies in the United States. The value of that share rises and falls in lockstep with the overall stock market and economy. The success or failure of one particular company is unlikely to greatly affect the value of the whole index fund.

Also, as JL Collins is fond of saying, the market is “self-cleansing.” Companies that go bankrupt are “cleansed” from the index, and replaced with another company. There’s a lot of volatility, but over time, the stock market relentlessly goes up about 8-10% a year in the United States.

Individual stocks

A far riskier way to invest in the stock market is by owning individual shares of companies. For example, you can buy shares of Apple or Microsoft. The value of that share is directly impacted by the performance of that single company (and how much people are willing to pay for that share).

The difference between an index fund and an individual stock is that the individual stock could fall to zero if the company goes bankrupt.

With greater risk, though, comes the possibility of greater reward.

I don’t own many individual stocks. But I thought it would be a fun post to go over the three individual stocks I do own, and my thoughts about stocks in general.

As of mid 2021, I own three individual stocks with a worth of about $50,000.

This is my current porfolio.

I would have a much bigger stock portfolio, but about 2 years ago, I cashed out the majority of my individual stocks. At the time, I had about $100,000 of individual stocks including Amazon, Apple, and Google.

Although I loved these stocks and expected them to rise in the future, I knew that in the long term, I wanted to transition to real estate. So I sold the stocks and paid somewhere between $10-20,000 of capital gains taxes to get the momentum going for my first deal.

Around the same time, I became increasingly obsessed with a small car company with an improbable dream: to accelerate the world’s transition to sustainable energy. I was fed up with my commute, and made the decision to purchase a Tesla Model 3. It’s been one of the most costly purchases I’ve ever made in my life, but also one of the best.

It revolutionized my commute and gave me back precious time both in and out of the car. I use this time to see my family more, work on my businesses, and educate myself with podcasts.

I also decided to purchase some Tesla stock.

Why I bought Tesla stock

I originally bought Tesla stock because of a few reasons. Here they are:

I believed in their mission,
Loved their product,
And thought the potential upside was really high (if they didn’t go bankrupt)

The first two points are pretty self-explanatory, and I don’t want to get into a big debate about electric vs gasoline vehicles. I think the trends from major car manufacturers clearly shows the winner of that argument.

But the last point is important. I believe that it’s not a bad idea to risk a relatively small amount of assets in gambles that can have significant upside. For me, this was a few thousand dollars in Tesla stock. I was okay with losing it all if Tesla went bankrupt, as it almost did while ramping up production of the Model 3.

But once in a while, gambles like this can pay off. And despite slowly selling off about half of the Tesla stock over the years, it still gained value like crazy and ballooned to over $30,000. Etrade says I’ve returned over 900% since purchase.

I sold part of the Tesla stock to reduce my risk and move money into other interesting companies. With the amazing gains Tesla has seen over the last few years, I felt willing to make similar bets on other companies. In a way, I felt I was “playing with house money.”

I bought a small amount of Tesla stock before the big run up last year, but it came back to earth more recently. I’m still up 937% from my initial investment.

Palantir

I feel silly discussing why I bought this stock, but here we go.

Palantir is a company that builds “software that lets organizations integrate their data, their decisions, and their operations into one platform.” It’s a company that courted controversy because of the quantity of their business that was devoted to the US government and the military. The initial mystery surrounding the company led to a memorable NY Times article and a big pop after their direct stock listing.

I sold some shares of Tesla and bought 300 shares of Palantir at $10 a share on the day of its direct listing in September 2020.

I was inspired to buy Palantir stock after watching the most recent season of HBO’s Westworld.

SPOILER ALERT!

In season 3 of the blockbuster series, we learn of Rehoboam, a terrifying computer that is smart and knowledgeable enough to accurately predict and manipulate the future of mankind.

I thought that Palantir had a passing resemblance to this technology and therefore felt the company’s success was inevitable.

This reasoning illustrates the silliness that comes with investing in individual stock. I felt that Tesla’s run up was fairly silly, so I might as well risk it on a similarly silly company.

Palantir shot up like crazy for the first few months, and has been on a downwards trend more recently.

I decided to buy even more Palantir stock when it was trading for $29, so altogether I’m only up 8.8% from my initial investment.

Airbnb

Airbnb is an online marketplace for lodging that connects hosts with guests. After many years of operating as a private company, it underwent an IPO earlier this year at a valuation of $75 billion. This is more than the valuation of Hilton and Marriott hotels combined! Pretty amazing for a company that had yet to show a profit.

As a parent, I’ve preferred for years to stay in Airbnbs when I travel. Having the extra room, the kitchen, and the space of an apartment or house makes traveling with a family so much easier.

The platform seems to be clearly tapping an unmet need for accommodations like this. It’s the biggest platform of its kind, and is growing at an astonishing pace.

So when Airbnb made its stock market debut in December 2020, I sold my Beyond Meat stock (which I’d decided was a bad buy), and bough about $10,000 of Airbnb stock.

It did great for a couple of months, but has been on a downwards trend since then. I’m up 1.8% from my initial investment.

Overall performance of my individual stocks

my stock performance — Line graph of my stocks

These three stocks have together done really well over the the last two years, but the vast majority of their performance was driven by Tesla’s big run up.

The overall slump in tech stocks over the past few months has hit this 3 stock portfolio quite heavily.

Conclusion

I hoped you enjoyed this inside look into my individual stock portfolio. I think it’s important to emphasize again that my reasoning to buy individual stocks is not very analytical. It’s based on things like feelings, hunches, and a resemblance to a fictional HBO computer.

That’s about as much thought I’m able to muster for my individual stock picking.

This is the principal reason that I only invest a small percentage of my assets into individual stocks, and I’m always ready for the possibility of this portfolio completely losing its value.

I put considerably more thought and analysis into my real estate investments, which is why I think I’ve enjoyed more reliable success in that arena.

The vast majority of my stock market exposure is via my retirement funds, where I keep almost everything in well diversified index funds.

What do you think? How is your individual stock portfolio doing? Do you put more thought into your stock picks than I do? Let me know in the comments below and please subscribe to my weekly newsletter so you don’t miss a post!