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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Mike Buckley who wrote (47074)	9/25/2001 7:58:09 AM
From: Wyätt Gwyön	Respond to of 54805

hi Mike, If there is any way to minimize risk in a non-relative sense, please let me know. :) i guess i mean "minimizing risk to the extent possible", and i don't think GG does that (or even tries to). GG as i understand it tries to reduce risk by identifying cos that are no longer facing "adoption risk", surely one type of risk (you can redefine this more precisely if you like). another way of saying this is that they are established cos. i agree established cos. are less risky than unestablished ones, but that is just one type of risk. as an individual investor, the main type of risk faced is of losing all or a substantial part of one's money. (a professional investor faces the additional risk of job loss, a consequence of underperforming the market too much.) therefore, the price paid for a stock must be considered part of the risk equation. just ask anybody who paid 130 for NTAP or 140 for JDSU or 180 for QCOM or 118 for MSFT or 110 for SEBL etc. etc. investing in equities is risky business, and it is likely that most of us will buy shares that go down in value, perhaps substantially and perhaps forever. we must accept that such risks are part of the equity investing game, but it would also be wise to try to offset those risks to the extent possible. one way of doing this is to recognize that these stocks fit into a wider universe of equities and can be classified--as small-cap growth, large-cap growth, etc. by splitting up exposure to different classes (and by having a portion of assets outside equities, e.g., in bonds), we can try to reduce the risk of having our portfolio destroyed by a hurricane that lands on "Hi Tech Beach" but leaves "Value Island" and "Bond Bay" unscathed (since we have exposure to both). so i would say in my opinion, if one is interested in minimizing risk, there are other asset classes to consider besides those identified in GG. of course, some calamities may be so great that they wipe out every type of asset (and even our civilization). even the best-laid plans may fall by the wayside. in that case, we'll likely have bigger problems than portfolio performance. here is an essay that explores some of these ultra-risks and what it means for our portfolio decisions efficientfrontier.com