portfolio management/diversification

[dakh]

Starting a thread to cover this topic that started to come up more and more often since folks now have an outsized portion of their holdings in TSLA.

Personally I have had a completely unreasonable 'all-in-TSLA, with leverage' so-called portfolio for the last 5 years. Growing a $200K portfolio by some low double-digit percentage wasn't going to make a big difference in my life, but catching a breakout event that yields retirement-grade result was. Now that the crazy risk-taking has paid off, it's time to mellow out and steer the ship towards wealth preservation. Since I am new to this side of the game, I'd love to hear what others are doing.

My current, probably overly simplistic and crude way of looking at it is like this.

Goals:
1. Maintain global purchasing power
2. Grow close or better than avg. market + inflation
3. Protect reasonable portion of the portfolio value from black swan events

In light of that, I break out the portfolio into 3 parts:
1. Diversification
2. Growth
3. Black swan event insurance

The growth portion of the portfolio is the least of my concerns at the moment. I sure can do better but I'm content with grossly overweight TSLA, ARKK and a few choice stocks that I personally think could do well or I just want to support the company/cause.

Black swan... I think this is tricky and I plan to evolve my thinking on this over time, for now I'm making it simple: been increasing my GLD and GBTC positions. I think this protects from a range of nasty events, like US dollar collapse (could be a few catalysts to that), to serious civil unrest, international escalations, etc.

Diversification is where I'm having the most trouble. I think at this point if I want to hit goal #1, substantial portion of the portfolio should be allocated to growth stocks in China, India, Russia etc. And the black swan events of various shenanigans with US dollar or international tensions (honestly I think both aren't that black swan anymore, they're quite likely) make it such that it doesn't seem safe to just get equity that is traded on US based exchanges. What are other available avenues, I have no idea. And if we're talking retirement accounts (401K etc), that gets even more trick.

Anyway, I would love to hear some feedback on if my overall framework is useful and what others are doing!

 

[mblakele]

It can be illuminating to backtest your choices. Here's one tool:

Backtest Portfolio Asset Allocation

 

[Robocop]

I'm no expert, but I can tell you what position I frequently find myself in, and that is: having no dry powder. I'm over-leveraged and all in TSLA. Fine. But during the drop in March, I KNEW getting TSLA at ~$350 was a steal and it'd rocket back up. But that didn't matter, as I had no assets to sell or cash on the table. So perhaps having something boring/safe in the event of black swan events does you TWO favors: One is you don't lose X$ due to a black swan event, but the second is that if there were some kind of crash and you recognized the opportunity to could then invest once again.

If you've already made a significant amount in TSLA, and I were you, I'd be doing the same thing. That said, my portfolio is pretty small and for me, right now, just staying in TSLA is more ideal. But if I had retirement-level savings, then I'd consider putting a large % aside in something relatively solid, for the reasons you discussed + having dry powder if a company like TSLA were to go back down for FUD reasons, etc.