There have been times (example: Germany during the 1920s) where holding all cash would have wiped you out.
And in 1929 in the US, the equities would have wiped one out. The 10 sigma risk spares no one under any circumstance. One can only think in terms of fragility to events and not probability of the risk (Learnt from Taleb). One does not have to be blind to circumstances. If the inflation is high, moving into inflation protected bonds or very safe blue chips would help. If inflation is low, then cash can’t hurt. With sudden events, no one is really safe.
If BRK or COST crash as businesses then almost entire US market will tank.
BRK is a collection of many companies but for the others you don’t know what will happen.
Not really. COST represents the entire US consumer market across 100s of industries. The management culture they have is eclectic and the kind that is CEO independent. As best as they come indeed. PEP is present in 100+ countries and has 100+ products in food and beverages. It is a proxy to global consumer spending. HDB funds every segment of Indian economy and the eclectic CEO independent management they have ensures that Bank performs superbly at all times. There is a reason why HDB has always been more than 3x expensive on P/B as compared to almost any bank out there. The supremely low risk is that reason. It is the same reason why COST trades way more expensive than WMT despite WMT having much better business operations for decades. Check for yourself what happened during 2008 crash. COST was among those firms that crashed relatively less. It was one of those rare islands of safety where everyone withdrew. So there are firms like those around.
Anurag, I don’t really think you would advise someone to put 100% in one company so why would you say it’s ok to put 100% in HDB? There are people on here would have considered going all-in on a single investment (sweet adeline did this recently). Why encourage them?
If it is firms like the ones I mentioned, then I really have no objection. Those folks only need time diversification or dollar cost averaging across multiple years to reduce risk.
Everyone has heard of Enron, Worldcom, Lehman Brothers, and many other 100% losses.
Very few firms are like those and you would be well served in reviewing the above failures. None of these firms had great management or business transparency and both of these are needed for any investment to be worth long term. There are better examples though. For example, Kodak or General Motors. These firms were great at various points of time but not very diversified. But since the business was largely transparent they gave investors decades to exit safely as they witnesses slow but persistent declines over decades. For any firm, one has to watch out periodically for any sustained changes in the business and that is true even for the firms I listed.
Of course, if one does not have time or inclination to study or understand anything at any level high repute low cost mutual funds or broad market index or target retirement funds are always reasonable options. But for those who can study deep and hard, barely a handful investments can do pretty well.
Anurag
All of the people here are more savvy investors with a wealth more experience and capital than I have (my portfolio is a shade under 52k), but being reckless by others standards (I knew SWKS was a winner and had zero apprehension the stock would depreciate when I bought them, otherwise I would not have been so bold) allows me to tread where most won’t go and I feel like that gives me a tangible advantage.