Voodooking Posted October 6, 2016 Share Posted October 6, 2016 Hi As per Ben Graham's suggestion in the Intelligent Investor, I'd like to allocate a portion of my portfolio to speculation. Graham didn't actually specify a guidance percentage, just "a portion, the smaller the better"... I am responsible with the bulk of my portfolio, and I understand how to value a company and read company accounts etc. Most of my money is invested in Net Nets, but I want to give myself a bit of room for some speculation on companies such as Tesla, Alibaba etc. where the business could go either way, but I want to take a gamble on it in full admittance that this is a gamble as I cannot accurately value these types of companies. This money would be held in a separate brokerage account and not mixed with my investment activities. So, what is a sensible amount to limit my speculative activities to? 10%, 12.5%, 20%, 25%, 33%??? What do other people do? Link to comment Share on other sites More sharing options...
petec Posted October 6, 2016 Share Posted October 6, 2016 I would suggest you a) define very clearly what type of company you put into this bucket, and b) keep it small (max 10%). Speculation is no substitute for considered investing. You can always double the allocation in 10y if you've found a winning formula. E.g. for a) you might want companies with potentially explosive growth that might last 100 years (i.e. like getting into Coke in 1900). Or, you might want gold miners as leveraged protection against inflation. Both are speculative; but the thesis and psychology are very different. You might not be able to value something, but you need to know exactly why you own it. Good luck. Link to comment Share on other sites More sharing options...
mbreject Posted October 6, 2016 Share Posted October 6, 2016 I keep my speculation in a different account (ira) so it doesn't mess with my value stuff. 15% max, but it's usually a lot less. it's been working well so far. my returns in my roth have been higher than my main account and i'm not being taxed on them =) Link to comment Share on other sites More sharing options...
wachtwoord Posted October 7, 2016 Share Posted October 7, 2016 About not being able to value something. Even in speculation it is better to be approximately right than to be precisely wrong. Link to comment Share on other sites More sharing options...
Guest cherzeca Posted October 22, 2016 Share Posted October 22, 2016 I manage what I call a conventional portfolio with about 75% of our invested assets and a risk portfolio with rest. As to the risk bucket I try to find special situations in which I think I have an informational/analytic edge over the market. Of course this is dangerous and raises questions of confirmation bias since I go into it thinking the market doesn't understand something. But to your point about maybe putting Tsla in a risk portfolio, that's not what I am talking about unless you happen to be an electrical/mechanical engineer. I think if you really embrace the risk portfolio concept you need to find special situations that are special for you and your knowledge set. My conventional portfolio is diversified and my risk portfolio is concentrated. Don't do this if you don't have a strong stomach and a filled liquor cabinet. Link to comment Share on other sites More sharing options...
BG2008 Posted October 31, 2016 Share Posted October 31, 2016 Just food for thought. Instead of speculation, you may want to try "over concentration in your best ideas". Over time, I've notice that I do better if I put 30%, 50%, or even 50+% into my highest conviction ideas. What's the definition of highest conviction idea? Healthy balance sheet, thesis thoroughly vetted, tons of DD, industry that you understand, not a dying or fast changing industry, sufficient margin of safety, good management team. When you find one of them, you back up the truck. For me, I've found that I compound much better this way. Now this isn't for everyone. Some people do very well buying 1% positions. If your styles leads to concentration, then you ought to consider that as an option in the opposite direction. Please do take into consideration your age, earnings power relative to your position size. The thought is that you should be able to come back if you're wrong. Link to comment Share on other sites More sharing options...
RadMan24 Posted October 31, 2016 Share Posted October 31, 2016 If you're going to speculate, I would suggest it being in a taxable account to allow for tax loss write offs, as opposed to IRAs where you eat the loss no matter what. Link to comment Share on other sites More sharing options...
DooDiligence Posted November 2, 2016 Share Posted November 2, 2016 Just food for thought. Instead of speculation, you may want to try "over concentration in your best ideas". Over time, I've notice that I do better if I put 30%, 50%, or even 50+% into my highest conviction ideas. What's the definition of highest conviction idea? Healthy balance sheet, thesis thoroughly vetted, tons of DD, industry that you understand, not a dying or fast changing industry, sufficient margin of safety, good management team. When you find one of them, you back up the truck. For me, I've found that I compound much better this way. Now this isn't for everyone. Some people do very well buying 1% positions. If your styles leads to concentration, then you ought to consider that as an option in the opposite direction. Please do take into consideration your age, earnings power relative to your position size. The thought is that you should be able to come back if you're wrong. Right on! It takes guts but if you feel like you're right & willing to ride up & down... Link to comment Share on other sites More sharing options...
Spekulatius Posted November 2, 2016 Share Posted November 2, 2016 My portfolio is a 100% spekulative. 8) Link to comment Share on other sites More sharing options...
AzCactus Posted November 23, 2016 Share Posted November 23, 2016 0% should be speculation. If you want to speculate go to your local casino and bet on red. Link to comment Share on other sites More sharing options...
MrB Posted November 23, 2016 Share Posted November 23, 2016 100% That will be the quickest way to cure you of the disease. Link to comment Share on other sites More sharing options...
s8019 Posted December 3, 2016 Share Posted December 3, 2016 What kind of speculation? Graham said that you can speculate intelligently or unintelligently. He also said that if you have many diversified intelligent speculative positions your portfolio may be of investment quality (which of course makes sense mathematically). Link to comment Share on other sites More sharing options...
BG2008 Posted December 18, 2016 Share Posted December 18, 2016 Just food for thought. Instead of speculation, you may want to try "over concentration in your best ideas". Over time, I've notice that I do better if I put 30%, 50%, or even 50+% into my highest conviction ideas. What's the definition of highest conviction idea? Healthy balance sheet, thesis thoroughly vetted, tons of DD, industry that you understand, not a dying or fast changing industry, sufficient margin of safety, good management team. When you find one of them, you back up the truck. For me, I've found that I compound much better this way. Now this isn't for everyone. Some people do very well buying 1% positions. If your styles leads to concentration, then you ought to consider that as an option in the opposite direction. Please do take into consideration your age, earnings power relative to your position size. The thought is that you should be able to come back if you're wrong. Right on! It takes guts but if you feel like you're right & willing to ride up & down... I've actually find that when you back up the truck and you're truly confident, you can back up the truck even more at lower prices. This obviously doesn't work for trades like a Fannie Mae or Freddie Mac. But if you can find the equivalent of Procter and Gamble trading at 6x P/E, you should be backing that truck up and increasing your position size as it trades down (this assumes that you're totally confident in your thesis and there's really no risk of impairment). I've find that I feel much better buying more when it trades lower because I know exactly what it is worth. If the stock vacillates a few times, you can trim and add to your position and it can increase your performance over time. Link to comment Share on other sites More sharing options...
Haasje Posted December 26, 2016 Share Posted December 26, 2016 Define speculation a little bit more clearly. I'd say 0% to Tesla but some people would consider some of the net-nets that are apparently in your main portfolio speculative :P Link to comment Share on other sites More sharing options...
Spekulatius Posted February 22, 2017 Share Posted February 22, 2017 100% That will be the quickest way to cure you of the disease. I agree with 100%. that is what I have been doing all along :-). Link to comment Share on other sites More sharing options...
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