It's better to buy and hold a diversified stock portfolio than to constantly trade. Some stocks will go down, some stocks will go up and a few will go up a lot. In my case, I tend to sell winners too soon, e.g. Apple, Amazon and Google which I owned early on, and hold the losers for a decade or more.
Here's the same anecdote from two different sources.
The coffee can story
The woman's financial affairs were handled by her husband, a lawyer. He was also her primary contact with Kirby’s firm.
Kirby worked with the woman for around 10 years, after which her husband suddenly died. She inherited his estate and securities and wanted to add the latter to her portfolio.
When Kirby analysed the list of assets left by the man, he was “amused” and even “shocked”.
The woman’s husband had passed away with an odd-looking portfolio of many small and large holdings. Several small investments in his portfolio were valued below $2,000. There were also many large holdings valued over $100,000.
However, one of his investments stood out. The man had shares of Haloid (which later became Xerox) worth $800,000. And this single investment was larger than the entire portfolio of his wife.
So, how did the man secretly amass such a big portfolio?
Kirby found the man was secretly piggybacking on recommendations for his wife's portfolio but with a twist of his own.
Every time Kirby gave a buy recommendation for the woman, her husband purchased shares worth $5,000 but never paid attention to the sell calls. After every purchase, the man tossed the share certificates in a safe deposit box and forgot it.
"I had worked with the client for about ten years, when her husband suddenly died. She inherited his estate and called us to say that she would be adding his securities to the portfolio under our management. When we received the list of assets, I was amused to find that he had secretly been piggy-backing our recommendations for his wife's portfolio. Then, when I looked at the total value of the estate, I was also shocked. The husband had applied a small twist of his own to our advice: He paid no attention whatsoever to the sale recommendations. He simply put about $5,000 in every purchase recommendation. Then he would toss the certificate in his safe-deposit box and forget it.
Needless to say, he had an odd-looking portfolio. He owned a number of small holdings with values of less than $2,000. He had several large holdings with values in excess of $100,000. There was one jumbo holding worth over $800,000 that exceeded the total value of his wife's portfolio and came from a small commitment in a company called Haloid; this later turned out to be a zillion shares of Xerox."
It's too hard to know which individual stocks will be a longer term winner. I've owned AAPL, GOOGL, and AMZN but sold for relative small gains of 10-20%. I've also owned SFIX and didn't sell at 500% and now am down 80%. That's why I'm switching to holding index ETFs which own a basket of stocks and continuously cull out the losers and keep the winners.
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This is not financial, stock picking, nor investment advice. Please consult a professional advisor.
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