November 5, 2021. I woke up, checked my phone, and watched my biggest position drop 35% in a single day.
Peloton had crashed. And I had bet big on it.
Too big.
Over 50% of my money was in PTON. I thought I was being smart - doubling down when it dipped. The stock had gone up 500% in 2020. Surely it would bounce back, right?
It didn't. It went from $160 to under $10.
When PTON dropped, I didn’t just lose 35% of that position. I lost 17.5% of my entire portfolio in one day. Because I’d bet half my money on one stock.
Want to know what the S&P 500 did that day?
Up 0.35%.
While I was bleeding money, the market was making money.
That's when I learned the lesson I should have learned years earlier...
Years ago, I worked in artist management. We had a client - let's call him Dale - who made up 50% of our income. When Dale decided to take a year off, we were screwed.
We'd been so focused on Dale that we ignored everyone else. All our eggs in one basket.
I knew this lesson in business.
But I forgot it in investing.
The fix isn't buying 100 different stocks. It's buying one thing: the index.
Since 1957, the S&P 500 has returned about 10% annually. No valuation analysis. No earnings calls. No investor presentations. No stress.. When Peloton crashes, the index barely blinks. That's the whole point.
You don’t need the next hot new stock, you need a boring Vanguard or SPDR S&P 500 ETF that makes 10% while you sleep. Still not convinced?
86% of professional fund managers can't beat the S&P 500 over 10 years.
These aren't regular people picking stocks from their couch. These are Harvard MBAs. Wharton grads. People who've forgotten more about investing than you or I will ever know.
If they can't beat it, what makes you think you can?"
I learned this lesson the hard way. Twice.
Don't be like me. Buy the boring index fund. Sleep at night. Make 10% a year.
It's not sexy. But it works.