Would you invest some of your portfolio in a very volatile investment with the potential for massive gains but the risk of a brutal loss?

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Many people do this. Just make a realistic expectation on your appetite for risk and go for it.


I think it’s good to have a portion of you portfolio invested in potential home run investments. I have around 5% of my portfolio invested in speculative instruments (crypto, options, etc). I think the question you need to ask yourself is when to rebalance. If the 10% of your portfolio tomorrow is worth 90% of your portfolio two weeks from now, will you rebalance the gambling portion back to 10% immediately or let it roll for another month or year in the more risky investment?


>I was thinking of setting aside 10% of my stock portfolio for gambling. > >If I had invested $10,000 in TQQQ ten years ago it would be worth $797,065 today. The worst was during last Spring when the COVID crisis scared the stock market. But if I ignored all the ups and downs I would be rich if I sold it today. The problem with your line of thinking is, you wouldn’t hold it out for that long. Because when the leverage etf was rocketing up since its inception, it would become a very heavily over-weighted portion on your investing portfolio, then you would experience a huge drop in values during volatile times. So you might sell if you couldn’t keep your emotions in check. When the etf is only 10% of your total investing portfolio, it’s easy to keep it because the risk of loss is low. What happen when it becomes 90%? You think you gonna keep riding it up and down to 800k today from your initial 10k investment? for the entire 10 years? Yeah right gimme a break. No sane investors would do that, unless you’re one of those degenerate gamblers from WSB showing off his stroke of luck. What would likely happen is you gonna bail midway when you watch your portfolio dropping from 300k to 150k because you thought you still made a huge profit from your ’10k investment.’ Why would I say this? Because if you could keep your emotion by holding it out long enough, you would’ve bought it during the COVID crash already, not making this kind of hypothetical statement today on a subreddit. Hindsight is always 20/20. “Hey, if I invested $10,000 in Amazon 20 years ago and never sell a single share, I would be a multi-millionaire sitting on a beach today.” It is a total nonsense other than survivorship bias.


But what are these mysterious non risky stocks people talk about ?


Yes absolutely. I feel many people should learn about pott odds and bankroll management which are poker terms. It will help them with their risk management. Your opponent bets $250, making the pot total 3000. You would have to put $250 in the pot to get a chance to win 3K. So you’d potentially make 3K on a $250 investment. You can lose this bet 12 times and win 1 time to break even. Y In poker you made an estimated guess on your opponents hand and figure out what percentage they have to win. If you feel you can win this bet more than 8.33% of the time, if you were to play this exact same hand thousands of time, in the long run you make money, even if you loose the current hand. If you have less than an 8.33% chance to win, because you strongly feel the opponent has you massively beat, even if you get lucky and win the hand, in the long run you will loose money by making that bet. The skill is poker is disguising your hand so the opponent guesses wrong, this effectively takes luck out of the long term game and you win or loose money based on your skill at reading hands and disguising your own. Bankroll management means never putting a huge chunk of money into 1 game, because if you loose or get into a bad luck streak, you can grind to make it all back because being unlucky doesn’t last forever and the bad luck will happen multiple times during a career. When you make this “risky investment” you need to calculate that if you make this same investment millions of times you will earn more money than you lose. This is one of the reasons I invested in GME with a smaller position and didn’t YOLO. I feel the short term is risky, but the long term risk is quite low. The short term payoff is potentially massive, the longterm payoff is high.