Now that I’m done watching Cobra Kai season 3 and reading all my favorite year end financial review pieces, I have two thoughts. One, Daniel LaRusso will always be the bad guy and I still don’t trust him or his Miyagi-Do style karate. Secondly, the biggest complaint in 2020 for investors wasn’t about what stock hurt them, but what stock they sold too soon.
To my fellow investors, good on you for making money. It seems like every equity trader was profitable. You guys rock - barely any loser stories at all. Quite remarkable. Let’s not even mention the Bitcoin crowd. They’re the greatest, just ask them. But I digress..
We all have those inner thoughts about the stocks that got away. In a bull market you may have them daily. That thought of - “if I only held on to … ”. We do it all the time and I promise you, we will all do it again and again. Guilty as charged - just read the BTBT story at the end of my last post. I bought it at $6.50 and sold at $9.75. I made 50% in a day (inadvertent humblebrag) and I want to puke. Within a week that stock ran to $23. It gets worse - the following week - $30. I refuse to add the chart here - it’s too painful. Let this be the worst thing that ever happens to any trader. In fact, I hope for this pain to happen again - masochism at its finest.
As a trader, hindsight can be your best friend and your worst enemy. Know your goal, time frame and be happy when you attain a set profit target. You will never be long enough when you are right. You may never catch the low tick or sell the high, but if you can lock in a profit and reach your goal then you did your job. It’s cliche, but no one went poor locking in profits.
Stay disciplined and ask yourself, why did I enter this trade? What’s my target and more importantly - what’s my timeframe? BTBT was a momentum, day trade play. I hit it and quicker than I anticipated. In hindsight, I should’ve let some of my position ride, but I’ve never hit one like this so quickly. I took my profit and ran. Damn you you hindsight.
If you are buying a stock for the long term, then you shouldn’t have many stories about giving it away. Hopefully you are still sitting on stocks with nice uptrends, maybe even a healthy dividend and a good balance sheet. Super smart, but boring as hell and it doesn’t make for a good bar story - remember them.
I like bar stories. Here’s one of mine.. I bought Google on it’s IPO day. Yes, 100 shares at $98.50. I was a big believer this was the next big thing. Pretty good call if I don’t say so myself. Well guess what? I gave it away!
So what was my goal? The goal - obviously, was to make money, but what was my price target and what was my downside risk? I was aggressive in my thoughts - it could double, maybe triple. Thankfully the downside risk didn’t come into play as it shot straight up. What were the technicals? Umm.. yeah - flying blind on this one.
What was my time frame? Well this answer was tricky and led to more questions. What was going on in my life financially? This trade was a bit more speculative than most of my holdings and I had two little mouths to feed. If there was a chance to take a nice profit, I decided I was going to do it. So after a few months I got my double and I got out.
Why not sell half or let it run? Well let’s just say my life took on a new financial twist and I needed those funds. We were pregnant with number three. Ironically, I learned this weeks after the Google IPO. That money helped us prepare for those costs. Years later, like I did for my first two kids, we decided to use our newborn’s birthday money and some personal funds to invest in one stock for him. So we did and put it away for the long term. Want to guess what I bought?