There are two conflicting drivers of my thinking right now: The notion that I should be conservative in cutting my losses on stocks that are losing money; and the fact that all of my largest mistakes have been made in selling stocks far too early.
Yes, I’ve lost plenty of money in speculations or failed investments… but those losses pale in comparison with the opportunities lost — the stocks that I sold because they had some nice gains, I failed to imagine that they could do better in the future, and situations when I was, if I’m being honest with myself, probably just too itchy to do something new with the money. The big one that always comes to mind is Tencent, which I sold back when it was still a little company running QQ, which looked like a copycat of AOL’s messaging service in China… but there are plenty of other examples or profits not made because I sold too early.
On the other hand, of course, the trader and fortune-builder has to have some comfort with harvesting gains… here are a few quotes that stick in my mind on that front.
“I made a fortune getting out too soon”J.P. Morgan
“I will tell you my secret if you wish. It is this: I never buy at the bottom and I always sell too soon”Baron Rothschil
And, of course, here’s a more contemporary quote about what really matters, helpful for those of us prone to overthinking and hand-wringing
“All investors need to learn how to be at peace with their decisions…. One of the nice things about investing is there are many different disciplines that work. You should find one that you’re comfortable with”Seth Klarman, Baupost Group
The mantra I try to stick with? It’s not about winning, it’s about building.
I’m not trying to get out of every position with a profitable trade, and the virtue of being a small individual investor and not a money manager is that I don’t have to beat the S&P 500 every quarter or risk losing my job or my bonus (though thanks to all of you and the attention you grant me each week, there is some pressure to not be an idiot — which is probably a good thing). I’m trying to build a portfolio of investments that I can hold for a long time ...