Portfolio Update - Living with the Ups and Downs

My first post was on March 5, 2021 (https://discussion.fool.com/i39ve-been-every-type-of-investor-in…). In February, I basically pivoted my entire portfolio from index funds and COVID plays (MRNA, UAL, SIX) to hyper growth companies. And I got absolutely crushed (down 28%) within three weeks and fell further to -32%.

TTD - 9.68% of account: -30.72%
SHOP - 5.62% of account: -27.27%
CRWD - 5.6% of account: -24.42%
FVRR - 4.62% of account: -12.34%
SQ - 4.49% of account: -17.89%
TWLO - 4.33% of account: -28.23%
UPST - 4.17% of account: -49.57%

For every $1 I invested, I was down to $0.68. This was my all-time low. Over the next 7 months my portfolio climbed and climbed some more. I rebounded from those lows with 132% gains at my all-time high. This meant that for every $1 I invested, I was up to $1.62.

In the past three weeks, my portfolio is down significantly from ATH. But I still stand about 23% above where I started the year. So now for every $1 I invested, I am up to $1.23:

DDOG - 22% of account: +38%
NET - 18% of account: +79%
DOCN - 14% of account: +13%
SE - 13% of account: +1%
UPST - 10% of account: +56%
MNDY - 7% of account: -9%
AMPL - 3.5% of account: -4%

This got me thinking a lot about this type of investing strategy. People should determine their investment strategies based on the interest they have in the subject and the emotional bandwidth they’re willing to dedicate to it. Some people might call emotional bandwidth “risk tolerance” but that’s too sterile for me.

In reality, it’s really, really hard to watch your portfolio fall and lose thousands (or tens of thousands, or hundreds of thousands) of dollars. It’s also thrilling to watch it skyrocket and think the good times will never end.

It’s so important to be honest with yourself on where you stand on the interest/emotional bandwidth spectrum. You can’t go wrong if you align your interests and your emotional bandwidth.

If you lack both the interest and emotional bandwidth, it’d be best to put your money on autopilot and go with low-cost index funds.

If you have interest in investing but lack the emotional bandwidth to manage the swings, find an investment category that you love. One friend values cash flow above all else and so he manages multiple low-cost rentals. Another friend loves REITs. Another swears by Motley Fool Stock Advisor.

If you have both interest and emotional bandwidth, basically every investment strategy is open to you - hypergrowth, crypto, angel investing. High peaks and low lows, but tons of potential. This isn’t a value statement - people who want to do hypergrowth investing are no better than people who want to invest in index funds. This board is simply a community of the first group.

I like the hypergrowth model at this stage in my life. I have a lot of interest in learning about these companies (AI with UPST, edge computing with NET) and I have the emotional bandwidth to manage the ups and downs. I have no kids in school, I’m far from retirement, and I don’t need the money in the short term. This gives me a ton of flexibility. Then, when I look at the math, the potential returns could give me financial freedom far sooner than I ever expected.

If I go with the market (low-cost index funds): $1 becomes $2 in ten years

If I barely beat the market (10% annual gains): $1 becomes $2.36

If I far outstrip the market (15% annual gains): $1 becomes $3.52

If I can replicate this year (23% annual gains): $1 becomes $6.44

If I can match Saul’s performance (far from guaranteed but circa 30% annual gains): $1 becomes $10.60

These numbers get even gaudier when you look at a 15, 20, or 30 year timeline.

Hypergrowth stocks, whether purchased straight or using options, are not for everyone. Neither is crypto. Neither is real estate. Neither are index funds. I’ll say it again - you absolutely cannot go wrong if you align your interests and your emotional bandwidth.