These days, I'm reading investment letters from so-called serious investors and professional firms. And it's almost funny too see how much people do rookie mistakes sometimes.
First of all, I don't understand why some people have such a concentrated portfolio. For instance, how safe is it to hold only 4 or 5 stocks if you have a big portfolio? (Of course, if you have a small 50K$ portfolio, it would not be intelligent to hold a lot of stocks, but if it's way bigger, like 200K$ or more, I think that you need much more diversification). When you own only 4 stocks, if one or two of your stocks do bad, something like 50% of the portfolio is affected.
We sometimes see people being overconfident, almost arrogant, about their stocks. It's not normal. Stocks are not our kids or our lovers. I like my stocks for now, but I may very well stop liking them tomorrow, which won't probably be the case with my kids.
Also, I've seen some people talking about how macroeconomics hurted them during the last year. For instance, some people thought that the low interest rates couldn't go lower, so they invested in stocks that could only go benefit from a rise of rates. But, guess what. They got it in the ass because the rates continued to drop. Yeah, they got a big fat black vascularized dick in the anus and it hurted.
Things can always go worse or better, whatever the state we're in, even if it looks like the basement level. Who thought in march 2020 that the pandemic would be as bad today as it was 11 months ago? Almost nobody. A month ago, when vaccines came out, everybody was excited, girls were wet, boys got a boner. At last, we would go out and meet people and drink and snort coke and fuck behind the dumpster.
But no. Coronavirus is still there. And he's smart because he mutated. Just like in the movies or in that good little game I had on my Iphone a few years ago. And now, the virus is even more contagious. And borders are closing once again.
These mistakes (over-concentration and macro-economics hypothesis) were commited by people who look like they believe a lot in their own opinions. You should always doubt about everything, including yourself.
A portfolio should resist to most of the angles of any possible story. If not, make adjustments to your portfolio. And don't forget that any CEO may be a possible drug lord who's laundering money with his company.
Having one drug lord among your 4 companies is very possible. Having 5 drug lords among your 20 companies is still possible, but less.