{{ In mid-March 2024, Daniel Kahneman flew from New York to Paris with his partner, Barbara Tversky, to unite with his daughter and her family. They spent days walking around the city, going to museums and the ballet, and savoring soufflés and chocolate mousse. Around March 22, Kahneman, who had turned 90 that month, also started emailing a personal message to several dozen of the people he was closest to.
On March 26, Kahneman left his family and flew to Switzerland. His email explained why:
This is a goodbye letter I am sending friends to tell them that I am on my way to Switzerland, where my life will end on March 27. }}
For all his knowledge of how foolish investors can be, Danny didn’t try to outsmart the market. “I don’t try to be clever at all,” he told me. Most of his money was in index funds. “The idea that I could see what no one else can is an illusion,” he said.
“All of us would be better investors,” he often said, “if we just made fewer decisions.”
and,
Noting that the stocks people sell outperform the ones they buy, Danny joked that “the cost of having an idea is 4%.” (i.e., the difference in the returns going forward.)
Sometimes the cost is much higher. I’ve looked back at my 40+ years of investing and I noticed that my SALES of stocks have cost me WAY WAY more than my BUYS of stocks.
For example, maybe 20 years ago, I sold half my position in UNH. And I earned a profit, bought it for ~$25 and sold for ~$50. That sale of UNH has cost me ~$450 plus a heck of a lot of dividends since then. Meanwhile, at roughly the same time I bought TDFX for ~$20 (and then some more at $15) and it went to zero. That only cost me $15-$20 or so.
For another example, I bought TMUS about 10-11 years ago at about $25. I sold half of it a few months later at $35 for a nice quick profit. That sale has cost me over $200 a share since! My IRR on TMUS is now just over 25% … delightful, but in actual money only half of the number it could have been today if not for that inopportune sale.
So I think I’ve learned my lesson. Whenever I have the inclination to sell, I think very hard twice and three times before I do so. Most of the time, it works out far better to just hold. Sure every once in a while something will go to zero while holding, but over time some of the other stuff will go up 10X or more.
(And, yes, I should have bought NVDA instead of TDFX, but I chose TDFX because I thought their technology was better and that they would eventually win. I was wrong.)