Indeed, the retraction (I refrain from terms like “meltdown”) was scary. I was surprised by own reaction. I’ve mentioned this before, but it warrants repeating. I thought I was mentally prepared for it. I wasn’t. I knew it was inevitable. I knew the market does not march in only one direction. But the extent of the retreat had me worried. I became somewhat panicky. I was worried and a bit overwrought (words like that always give me pause, can you be underwroght - OT, I know).
Although I was concerned and not in a good way, at first I did nothing. I kept reassuring myself and also read reassuring commentary, all of it on this board. The general market commentary either ignored it because the retreat was not market-wide, it was pretty well focused on tech stocks. Or if there was commentary in the financial press it was pretty uniformly negative - at least that’s my recollection. So I did nothing because nothing seemed to be the most appropriate thing to do. As I thought about it, I just couldn’t see what had really changed. As far as I could determine, the only significant change was the price of most all my positions. But from a business perspective, nothing disruptive had occurred. Nothing that would generally impact virtually all my holdings. And, in fact my portfolio never dipped below the starting position for the year. For that matter, even at the nadir I was still up around 25% for the year. My goal has always been 20% a year which seemed like an achievable stretch goal at the time. I had just become spoiled by having had performance beyond my wildest notions when I first decide to take this investing stuff seriously (that would be 2016).
But, as I continued to scratch my head, I did decide to make a few changes, not because of contraction (although that’s what motivated me) but because in my estimation there was a change in the business outlook for ZS and MDB. In general, I’m reluctant to sell. Part of that is due to irrational thoughts like, “it’s only a paper loss until you sell and lock it in,” but more rationally because if you are committed to staying fully invested selling implies buying. You have to be right twice. So, unknowingly, generally I took Tinker’s advice, do nothing.
But specifically, the story about ZS and MDB had changed. I needn’t go into details, if you’ve followed this board for a while you will already know, in fact, I think it’s summarized in this thread. I cut both positions about 50%. I still like both companies longer term, but “longer term” is very ambiguous. I felt both positions were overweight for the here and now. As someone on this board posted a while ago, we need to practice ruthless allocation of money.
I started relatively small positions in ZM and COUP. I also initiated a fairly large position in DDOG (BTW, I really don’t like the company name). I also added quite a lot to my already large positions in CRWD and AYX.
Did I make good decisions? To be honest, I have not assessed where I would be today had I done nothing at all. Part of that is just laziness, it wouldn’t be a big effort, but I just haven’t taken the time to do so. But then there’s also the question of what useful information will I gain from the exercise? I can’t go back and revise my decisions. And the actions were so specific, there’s no general lesson to be learned.
Will knowing if I made the right decisions change anything in the future? I can’t imagine what changes I would make. In other words, there’s no new process information to be gained no matter what the outcome. Next time (and I’m confident that there will be a next time) I will go through the same process (well maybe I will forgo some of the panic). But the process of assessing if there has been substantive changes in general won’t change. As for making allocation adjustments, in theory I do that on an on-going basis, though when things are going well, I’m prone to be less attentive. That’s my bad, but there’s no lessons from the second half of last year that will alter that.