"Put all your eggs in the one basket and --- WATCH THAT BASKET."Unlike many quotes attributed to Mark Twain this one is actually his: Pudd'nhead Wilson, Pudd'nhead Wilson's Calendar, Chap. 15
Unfortunately for proponents of this theory, Twain was forced to file for bankruptcy (due in part to investments in a typesetting machine and a publishing house) although he eventually paid all his pre-petition creditors 100 cents on the dollar.
From the Irrelevant Investor:
One of the many seductions of dabbling in the stock market is the potential for lottery winners. Look at the returns these stocks have generated since going public:
What many investors don’t know or don’t seem to care about is that for every Apple, there are several thousand companies that have come and gone (to zero). Let’s not even talk about the near impossibility of actually staying on the horse for a multi-thousand percent return.
Alright fine, let’s talk about it.
The hypothetical investor who captured the entire 128,000% return over the last nearly sixty years would have experienced plenty of discomfort along the way. Disney has seen eight separate drawdowns of at least thirty percent. To be clear, what this means is that on eight different occasions, Disney would hit new all-time highs and then fall by at least thirty percent. A few more data points worth mentioning:
1) Disney has been in a 20% drawdown 55% of the time.
2) After gaining 270% in the seven years following its IPO, Disney would decline 80% in under two years.
3) Disney has been in a 50% drawdown 25% of the time.
These sobering numbers come from one of the greatest companies of all-time. What does the rest of the stock market look like? A study from J.P. Morgan examines all Russell 3000 stocks from 1980-2014. What they found was that 40% of all stocks suffered a catastrophic loss, which they define as “a decline of 70% or more in the price of a stock from its peak, after which there was little recovery such that the eventual loss from the peak is 60% or more.” J.P. Morgan also found that two-thirds of all stocks underperformed the Russell 3000, while 40% of stocks experienced negative absolute returns....MOREHT: The Guru Investor
JPM: "The Agony and the Ecstasy: The risks and rewards of a concentrated stock position"