What would you say about a hedge fund that puts 40% of their capital in one stock?
- Thread starter Daal
- Start date
Yeah, I should add that a vehicle like this wouldn't be my cup of tea either...
Although it should be mentioned that "real serious" money is made from single sector bets mostly ex: real estate and energy in early 00s, internet in 90s etc. etc.
So how would this bitcoin bet be any different than those mentioned above? Folks need to find HOT sectors before hand and take positions and probably add to them once they seem to be working out.
So how would this bitcoin bet be any different than those mentioned above? Folks need to find HOT sectors before hand and take positions and probably add to them once they seem to be working out.
I appreciate THIS thread! It makes one rethink this process... For a prospective trade... "If the success probabilities are high enough, how much of your capital should be allocated?"
Like everything else, it's a guess. How accurate is the "success probability"... do you know or just assume?
Great point. I started to revise to clarify "probabilities" are those one is willing to stake their capital on, so would NOT be someone else's info, but self derived to obtain "ownership" in the quality of the info. <-- Not stated well, but hopefully the intent is clear.
An attempt at humor, but with some association as well:
Dorothy, once asked the Tin man: "What would you do with a brain if you had one?" -- The question, is akin to this thread determining how much should be Risked on a specific trade. The reference to "brain" (the prerequisite) is related to the probabilities, as Scataphagos mentions!
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Well... regardless of the "source" of conviction, you still can't know... IOW, you can be "convinced as HELL" and still be wrong... trade what appears to either "make sense" or "appeals to your hope/greed"... with a stop, "just in case."
I'm in favor of the "all-in" play... for the market as a whole or for a sector... but not for an individual stock as there isn't sufficient control of the downside possibility.
The fund was called The Buffett Partnership, LTD and the manager was Warren Buffett. It was written in 1966
http://csinvesting.org/wp-content/u...t_partnership_letters-1957-70_in-sections.pdf
page 91
And he later successfully placed 40% of Berkshire Hathaway's worth on American Express during the "Salad Scandal."
Nice the way you made people think by not initially revealing you were speaking about Buffett.
I was just going to write that activist funds do this sort of things all the time. Buffet is one of them.
From the investors perspective, there is a positive - you know more or less where the money is and why. There is a bit of assymetry risk since, assuming a standard fee structure, you get 80% of the upside and 100% of the downside so it’s like being short a put on 20% of capital. A shrewd manager might be incentivized to put on a more volatile position to take advantage of that option.