Kicking Yourself When You’re Winning
Have you noticed? The internet makes everything look easy. Just DIY yourself a home remodel in 24 hours! Sure, no problem! Done in a jiffy! Start your online business today and you’ll be making millions in mere weeks!
Simple as pie! And that’s how the world works on the internet.
Unlike in the real world, absolutely everyone on the internet is incredibly confident, with super amazing skills and talents.
If you follow the person finance world, you’ll see these amazingly investors that never make any mistakes. Landlords with perfect tenants, and stock investors with perfect asset allocation and GIGANTIC gains. Investors that only make money.
If you ask me, the level of talent on the internet is absolutely freaking amazing! Bloody friggen unicorns! I wish I knew some of those folks! Maybe a little of that super talent could rub-off on me…
Sadly, the average person is nothing like the super-unicorns on the internet. For example — I’m just an average person that happens to be super-slow at home remodeling, and I make investing mistakes all the time.
What’s worse, I have a tendency to kick myself for those mistakes…
An Impossible Standard
The internet (of course) sets impossible standards to live-up to. This includes investing results that are impossible to achieve without taking on monumental risks.
I know all this, but I still compare and I’m hyper-critical of my own investing mistakes.
With over $3 million dollars invested you’d think I’d go a little easier on myself, but I don’t. I kick myself about every little “mistake”, even when the blunders are not truly terrible.
Take for example, my recent sale of Limited Brands (Symbol: LB) shares. I sold the shares back in June for $19.76 per share. I thought this was a very good price. Retail looked like a dying business to me, and the pandemic was likely to further disrupt the retail business for years. $19.76 seemed like a very fair price given those circumstances.
Yet here I am three months later and LB shares are over $30 per share. Dang-it! $%@#! If only I held on to those share just a little bit longer I could have made considerably more money. What a bone-head!
This is exactly what I’m talking about — Even though selling the shares was a financial win for us, I kick myself for not making that extra 50%. Why couldn’t I have timed it better?
I set impossibly high standards (financially) for myself, and beat myself up when I don’t reach those goals. It’s a really bad habit.
Knowing The Unknowable
Why do I this? Perhaps it’s the engineer in me, striving to build a perfect money making machine. After-all, I believe that one of the big secrets to building wealth is creating a cash-flow engine — a machine that cranks out wealth, rain or shine. A machine that’s immune to wild market movements, and market prediction errors. In other words, a money-machine that’s anti-fragile (like the book).
To a certain extent, I’ve succeeded at this goal. Last year our assets generated $58k in cash without me lifting a finger. This year we’ll probably break $60k when the year is finally done. This is during a pandemic, and probably the worst recession I’ll ever see in my lifetime… yet our cash generation machine has been remarkably stable.
By most accounts, we’re doing OK. Yet I kick myself for not doing better.
It’s a silly thing to do, but I see and hear other investors doing this all the time. They kick themselves for not holding onto those Apple shares from the 1990’s that would have been worth millions today.
Never mind that back in the 1990’s Apple was in terrible shape. Steve Jobs wasn’t even at Apple back then, and sales of Apple computers were slowing. The iPhone wasn’t even an idea at that point!
Then, there’s the investors who bought Amazon after the dot-com bust for $10/share, and sold after a nice 50% gain. Today those shares would be worth $2,955 per share! If only they had just held on!
Never mind that Amazon was a mere online bookseller back in those days. Most books were still being sold at physical booksellers like Barnes & Noble and Borders. There wasn’t a shred of evidence that might have indicated Amazon would eventually become a seller of everything, a movie studio, a grocery store, and even giant cloud business.
In 2020 it’s common to hear a stories about investors who sold Tesla, only making a 150% return. “Curses!” they say, “If only I’d held on longer I’d be worth millions more!”
Why do we do this to ourselves? Why do we kick ourselves, when all the information needed to make that perfect decision is completely unknowable?
Striving For Perfection
Over the years I’ve learned that perfection isn’t something you should strive for in investing. Investing isn’t like engineering — It’s not a hard mathematical equation that can be solved, or a complex system that needs to be perfectly optimized.
Investing is part art and part science. It is a skill (and you can gain some mastery at it), but perfection is NOT achievable.
So much of investing is unknowable and random. You simply can’t predict what the stock market is going to do next week or six months from now.
So don’t kick yourself for taking a few nice gains. You’re still winning! The future is impossible to predict, and the stock market can move in any direction based on the fickle mood of the market.
It’s OK to not take home a “mother load” on a investment. Smaller gains are perfectly OK. If you walked away from the table with a win, then congratulations are still in order!
Stick With Compounding
The thing is, you don’t need to be a internet unicorn investor to build wealth. You don’t have to time the market perfectly to make money either. You can still do well compounding money with much smaller gains.
Sure, you might not be taking that private jet to Madrid for Christmas, but so what? You can lead a very good life… a very good financially independent life without making yourself crazy trying to achieve perfection.
How is it done?
By simply compounding those small wins over and over — Using what is knowable and achievable to make forward progress, and avoiding the biggest blunders. Over and over again.
Yes, they might seem like baby steps compared to the monstrous gains you read about on the internet… but slow progress is still progress. Every mountain is still climbed one step at a time.
[Image Credit: Flickr1, Flickr2, Flickr3]
There is definitely a survivor bias for the lovely stories paraded on the internet! Simple steady wins (with the occasional loss here and there) is more than enough for many folks to win the game – as long as the game is defined in a wise way 🙂 Keep on truckin’!
Excellent post… It’s always seems deflating when you win a bit and then you seen it go up significantly higher. However, I have learned to always just go back and focus on this one rule to see if I should be sad with the outcome of the trade, “Did you lose money?” If I did not, then I’m happy regardless if I sold “too early.”
“Bloody friggen unicorns!”
Ha, love it. I’ll take a regular unicorn over a bloody one I guess 🙂 I think you’re hard on yourself because you have the kind of personality that wants to achieve and improve. I do too. The balance comes when you want to improve and do better while simultaneously recognize your victories and take a sense of pride in how far you’ve come. It’s a tough balance.
Love this. I think it’s extremely important for folks to realize that it’s not a perfect world even though the Internet wants you to think it is. I tend to share a lot of the mistakes I’ve made along the way (and continue to make) so others can see the other side of the coin.
That said, by learning from our mistakes, focusing on the here and now instead of dwelling on the past, and making sound decisions today, achieving wealth is far from an impossible goal. Let’s hear it for us “average” people! 🙂
To Dave’s point, I think the type of person who will obsessively analyze their way to building wealth a little bit at a time, to consider something like retiring early–well, that personality doesn’t just stop once you reach a point of “enough”. It’s hard to “turn off”. That’s okay. It takes practice!
And for sure, the Internet–Twitter, the blogosphere, etc.–are all filled with idealized versions of folks. We’ve tried to be careful to harp on our mistakes, which I think is much more relatable which should help people persevere through the harder things.
I suppose you’re right about that ChrissTTL. You just can’t turn “off” those parts of yourself.
This happened to me. I sold TGT and DE for a nice gain then saw them both climb relentlessly. I try to take away something from this about not to sell good businesses to get into something else more undervalued. But on balance things have been just fine.
Take care,
Mike H.
Thanks for your insight Mike! I was lucky enough to hold onto my DE shares. Why the heck is the price so high right now?
I doubt anyone can really bat a perfect score. Even Warren Buffet makes mistakes, like with KHC. I agree just re-investing and compounding will make all the difference in the long run. These days, I usually just stick with my winners and re-invest the dividends rather than finding new positions.
I do that too whenever I made a mistake. I had Amazon, Intel, MSFT, etc and sold when they went up.
Now, I avoid selling as much as I can. It’s easier for me.
That’s probably a good idea. I believe it was Phil Fisher that first promoted this idea of ‘buy and hold forever’.
Mistakes are par for the course in investing. I make them all the time. Like the time I bought ETSY and sold it for a 50% gain over three months. If I would have held it for 2 years, I’d be sitting on a 10 bagger.
What is important is that you are correct more than you are incorrect and you will do well over time. Even mistakes in investing can be lucrative.
great advice! Thanks TPM!
I agree with you, but most of just don’t have enough information to really make smart decisions.
I took one in the Jimmy with Boeing. I bought it years ago. Warren Buffet talks about businesses having moats, and Boeing definitely has one. Its only competition in the passenger plane market is Airbus and it is an extremely expensive business to get into. The stock was set to rise at a good rate and double within 5 years according to the pundits. Then you have the plane crashes. Then you have no one traveling with the pandemic. You just don’t really know.
I like to have one stock that I call my gamble. I had bought Novavax. I liked their odds on their Novaflu vaccine. It was worth just a few dollars a share. Then the pandemic hit. The stock skyrocketed. I sold around $40 thinking there is no sound reason for it to continue higher. Then the stock went up to around $140. I could have tripled my money if I had held on just a little longer.
The important thing is to try and make smart choices and to stay in the market. You cannot really retire based on what a CD pays these days.
Boeing is a tough one, sorry to here about that. There’s just too many unused planes right now, and probably for years to come. They are going to be in a world of pain for awhile, but I doubt the US gov. will let them go bankrupt.
You just have to be happy with your decisions and live on. It’s hard to look back and kicking yourself for decisions that you’ve made at that point of time.
Great pics, I’ve been to both places I think (not 100% sure about the 2nd pic)
Thanks Tawcan!
I wanted to buy AMD at $2 a share. I didnt for some reason. I will never get over it. Haunts me.
The one that got away…. 😉
Don’t be too hard on yourself for LB. You never go broke selling at a profit 🙂
True Enough! Thanks Eric!
What’s up Mr. Tako – nice to see a fellow slow DIYer! I treat home improvement projects like my Poky Pedal bicycle philosophy: Eh, we’ll get there eventually. Probably a good thing to apply to investing as well. Sometimes you win, sometimes you lose, but generally speaking with sound investment strategies you improve year over year.
Good post. It’s a good reminder that we don’t have to be perfect, and frankly, usually won’t be.
Buying and holding a broad based, conservative fund works well. About two years before we got married my future father-in-law bought $1000 of Investment Company of America for my wife. That was 1965; we never touched it (adding or taking out, just DRIPS) it recently was about $250,000. The only better idea would have been a fund with a lower fee and no front load. I like a total market index fund today.
I bought some shares in a small bank that went up 300%. The only problem is that our local currency ended up getting eroded 66%, so in USD I ended up being flat. On the other hand my pure cash holdings in USD are now worth 3x as much as they were 10 years ago risk free.
Sigh, it’s a pity that the currency is now making such a difficult time for us investors outside the US/other developed markets. We dont spend in USD so the currency volatility is a problem for our expenses and seems to dwarf most of the movements in equities.
Anyway, we can only cost average into good shares globally and hopefully come out reasonably well.
Mistakes and self reflection are what make us stronger. Sort of like a compound interest in ourselves. I think to be ones own strongest critic is a quality–though it can be an exhausting one. Great post. Thanks for sharing the “other side” of the investing coin.
-MR. HD