My Stock Portfolio

Traditionally, my discussions herein have focused only on my 401(k) at a former employer. In the interest of full disclosure, I have several more investments than those five mutual funds. I have an active 401(k) with my current employer, a Rollover IRA with assets from a prior employer (which coincidentally happens to be my current employer) (it also has a very small past IRA contribution I made one year to shift my tax liability into a refund), a Health Savings Account with my current employer, and a Roth IRA with a brokerage account.

Primarily as a means to further educate myself on the how-to, I have been investing in individual stocks for the past five years. I have 35 active stocks, including one below zero that should close soon (but excluding a couple other inactive stocks that zeroed out). The reason I keep my stock portfolio in my Roth IRA is the tax-advantaged status of the account, so any profits I realize in this account will not be taxed later.

I was curious how my Top 10 holdings would look, if reported the same way mutual funds report theirs, so I mocked up the list below. 

Week-end 10 largest holdings

(75% of total portfolio assets) as of 12/4/2020

1. NVIDIA Corp. $NVDA

2. Tesla Inc. $TSLA

3. Alibaba Group Holding Ltd $BABA

4. Carnival Corp $CCL

5. Visa Inc. $V

6. WP Carey Inc. $WPC

7. Restaurant Brands International Inc. $QSR

8. Slack Technologies Inc. $WORK

9. Stitch Fix Inc. $SFIX

10. World Wrestling Entertainment Inc. $WWE

The brightest red flag is how my Top 10 represents 75% of my total portfolio assets, so the other 25 stocks only average 1% of the total assets each. Not all my Top 10 are huge winners either. Only the top two have >1,000% return. Unfortunately, my initial investments vary among stocks, although the reported Top 10 is strictly a reflection on the current balance. Only seven of my investments have doubled from the original investment, 11 are showing a loss (which excludes a couple stocks that were full losses), and I have pulled my initial investment amount out of four of my current investments (two in the Top 10).

The most meaningful lesson I have learned from investing in individual stocks is the importance of risk/reward scenarios. I am not lamenting my full losses or other losses. I becomes very apparent (especially after creating a spreadsheet of this portfolio) that the risk is limited to 100% while the returns are unlimited. This does not create a risk-free investing scenario, but it shows how huge returns (>1,000%) by one or two investments can exceed the losses in several losers.

To follow up on what I noted as a bright red flag is the poor allocation. If this portfolio were the bulk of my investments, then I would be more concerned about it. As it is, the total portfolio assets represent about 5% of my overall investments, so I am not inclined to manage risks that this top-heavy allocation could present.