Growth stocks require conviction because they tend to be highly volatile. It takes conviction to ride out a 50% drop – specially if you are in the unfortunate position to have bought at the top. For an example, my TSLA cost basis is $375 which means I cannot lose money until TSLA drops below $375. FALSE! Or is it? It’s ‘anchoring.’ What if I had bought at $1200?
What counts is the price at which I will be able to sell the stock when I decide it’s time to sell and that has little to do with the price I paid – except psychologically [and taxes, if any].
The above scenario illustrates why there is so much discord when markets drop. I have heard perfectly honest people accused of improprieties just because stocks dropped in price.
If you were running a board, how would you deal with it?
BTW, this is a major reason I don’t like to give stock tips. It’s a great way to make enemies!
Denny Schlesinger
10 Likes
“Growth stocks require conviction because they tend to be highly volatile. It takes conviction to ride out a 50% drop – specially if you are in the unfortunate position to have bought at the top. For an example, my TSLA cost basis is $375 which means I cannot lose money until TSLA drops below $375. FALSE! Or is it? It’s ‘anchoring.’ What if I had bought at $1200?”
If you are investing in a company, growth or value, you are looking at a time horizon that
is likely different than if you are trading in a company stock. You might use momentum as
a means of selecting a stock trade - and sell when momentum fades. You might look at cycles
in the economy to buy and sell company stocks. But if you are looking at investing - long-term
in a company, you very well might consider dollar-cost averaging to establish a position
in a growth-stock.
Howie52
Course, I have generally failed miserably in buying at a “reasonable” price. I tend to find
an interesting investment premise and under-due-diligence my way to establishing a position.
3 Likes
Course, I have generally failed miserably in buying at a “reasonable” price.
The best laid plans of mice and men…
https://literarydevices.net/the-best-laid-schemes-of-mice-an…
You are in good company!
The problem is when instinct overrides rationality, ‘I just can’t take it anymore!’ You have to have your hedges and safe refuge in place. In my case it’s sufficient cash, not in the brokerage account, to ride out the correction.
Denny Schlesinger
Capt:
The problem is when instinct overrides rationality, ‘I just can’t take it anymore!’ You have to have your hedges and safe refuge in place
Is Saul somewhat accountable for the carnage among his readers? If, as Charlie Munger suggests, we should “always invert” then the above notion might become something like “I just can’t stop doing this”.
It is (likely no more) easy to be caught up the recent in SAAS fever. IMHO Saul failed (would not allow, even)to warn that this is not a lab where interesting specimens are evaluated. The gorilla in the room is that a lot of the specimens are venomous and sting painfully when mishandled or not adequately managed. (See above about hedges and safe refuges)
“Handle at your own risk” is not, IMO, warning enough for managing stocks. A good exercise in lab technique might have been for an occasional review of a few historical bull market implosions.
Enough metaphors…
–s
7 Likes
I’m just as happy not to mention names.
Denny Schlesinger
1 Like
Cpt, apologies if I erred. I just assumed that since his name has appeared on a number of boards recently, it was ok…
–s
1 Like