I am writing this article because after 14+ years of investing, for the first time I feel like i’m in a FIFO crowd (explained below). I bought in to Facebook at $19 and rode it out to $70+ today. This is my exit before the herd also leaves. Am I leaving early, very likely. Am I going to be annoyed when Facebook hits $90, probably. But being able to dictate to the market my belief and be able to walk away is an amazing feeling and having a 3.5 bagger (350% return) is not a bad time to walk away.
Market is like a casino
Ever walked away from a casino happy that you came? How many times have you won? lost? I am willing to bet you think you have won more than you have and in-fact most of us have lost money in aggregate. A few painful events at the casino and we tell ourselves
ok this time i’m going to spend $100 and if lose it I walk away (100% lose) or If I am up anything more than $100, I walk (100% return).
We set these boundaries because we know our pain tolerance of losing money, but we rarely know when to walk away, even when we have triggered the 100% return threshold. Stock market reminds me of a casino where losers are abundant and winners far and few. Three personalities which come to mind, two are long term losers and only one a winner.