Great write-up as always. The more time is passing the more i conclude that conviction is very, very important.
I was very calm and patient during the chaos of '22. Didn't sell, anything and kept what i had.
The problems came in '23. Seeing others in Saul's board jumping from company to company and getting ahead with they YTD results I started to think what to do. I sold DDOG, BILL, GTLB on their Q4 FY23 bad earnings...and then their Q1FY24 send the stocks up, up, up. Thus I was falling behind.
I am aware that I have to compete only with myself, It is unpleasant to see 15-30% difference from the others.
So, I guess my question is how you feel in these moments, does the anxiety brings its arms around you in an iron hug and how you deal with that?
Do you read your notes for a company, before selling it and this helps you sustain your conviction?
Thanks in advance for taking time to read my chaotic questions.
100%! Conviction is perhaps the most important emotion that helps us get through tough times. Without it, mistakes can occur at the worst moments. That's why I'm writing here and putting in the work in investing. It helps maintain and build conviction.
I understand what you mean by falling behind. But it might help to understand:
a) It's not a competition against others. The only person you should compete with is yourself, striving to improve every day. Keep learning, keep reading, keep evolving. It will eventually lead to great outcomes in the long run.
b) Year-to-date returns are mostly meaningless. Investing is about playing the long game. And the only metric that should eventually matter is CAGR (compound annual growth rate) over a very long time frame (10+ years). Understand that one might underperform for years and still achieve a great performance in the long run.
There are many ways to achieve a great long-term CAGR:
One approach could be to invest like Saul. He maintains conviction by selling investments once certain metrics trend in the wrong direction. The downside of that approach is a high portfolio turnover and having to pay a lot of taxes. It works for him, but for most, it doesn't.
Another way could be to invest with a truly long-term perspective. Develop a strong investment thesis (yes, it requires effort, I'm sorry) and then hold onto the company as long as that thesis remains valid. There will always be quarterly setbacks, and if you sell every time that happens, the chance of making a mistake is high. Not only might you have to pay taxes on your previous gains, but you also have to be right with the new investment, which, additionally, has to first recover the taxes you've paid. Embracing inaction can be a virtue.
TL;DR
1. Define your investment goal (e.g., outperforming the S&P 500 by X% or achieving a 20% CAGR over 10+ years).
2. Define your own investment philosophy (long-term approach, Saul-like, or whatever suits you), and stick to it vigorously.
3. Develop a robust investment thesis for each company.
4. Keep writing notes each quarter, especially if the thesis remains intact, and review them during moments of doubt.
You really need a strong stomach and a lot of great slogans. You have only really held a few stocks. You bought a lot back at a high price and it has nothing to do with conviction.
I find your new approach very interesting: "This means that my primary focus is investing in the people, the leadership, and the culture behind great companies.
I was even more surprised when I saw that you invest in the biggest live casino operator. Yes, nice value at the moment, which you never had in your portfolio before, but "leadership" and "culture"? I don't want to put ethical investing up for discussion, but anyone who bets on "leadership" and "culture" and buys Evolution should define these points very precisely and question them. In times when money is scarce, even more money is gambled away in the hope of hitting the jackpot. Somewhat similar to your whole process in recent years.
Wikifolio doesn't include all stocks and trades I made since Wikifolio doesn't let you buy all companies available on the world wide stock market, and therefore doesn't match my real portfolio 1:1, that's why performance differs.
Regarding Evolution - I suggest researching more about the people behind the company, especially its CPO.
it is up to you. I am still wondering about EVO regarding your quote, but if you think this CPO is reliable (coming from MGM), that EVO is ethical and within the 20 best companies out there to own, it is ok for me.
Hey Moritz,
Great write-up as always. The more time is passing the more i conclude that conviction is very, very important.
I was very calm and patient during the chaos of '22. Didn't sell, anything and kept what i had.
The problems came in '23. Seeing others in Saul's board jumping from company to company and getting ahead with they YTD results I started to think what to do. I sold DDOG, BILL, GTLB on their Q4 FY23 bad earnings...and then their Q1FY24 send the stocks up, up, up. Thus I was falling behind.
I am aware that I have to compete only with myself, It is unpleasant to see 15-30% difference from the others.
So, I guess my question is how you feel in these moments, does the anxiety brings its arms around you in an iron hug and how you deal with that?
Do you read your notes for a company, before selling it and this helps you sustain your conviction?
Thanks in advance for taking time to read my chaotic questions.
Thanks for your feedback!
100%! Conviction is perhaps the most important emotion that helps us get through tough times. Without it, mistakes can occur at the worst moments. That's why I'm writing here and putting in the work in investing. It helps maintain and build conviction.
I understand what you mean by falling behind. But it might help to understand:
a) It's not a competition against others. The only person you should compete with is yourself, striving to improve every day. Keep learning, keep reading, keep evolving. It will eventually lead to great outcomes in the long run.
b) Year-to-date returns are mostly meaningless. Investing is about playing the long game. And the only metric that should eventually matter is CAGR (compound annual growth rate) over a very long time frame (10+ years). Understand that one might underperform for years and still achieve a great performance in the long run.
There are many ways to achieve a great long-term CAGR:
One approach could be to invest like Saul. He maintains conviction by selling investments once certain metrics trend in the wrong direction. The downside of that approach is a high portfolio turnover and having to pay a lot of taxes. It works for him, but for most, it doesn't.
Another way could be to invest with a truly long-term perspective. Develop a strong investment thesis (yes, it requires effort, I'm sorry) and then hold onto the company as long as that thesis remains valid. There will always be quarterly setbacks, and if you sell every time that happens, the chance of making a mistake is high. Not only might you have to pay taxes on your previous gains, but you also have to be right with the new investment, which, additionally, has to first recover the taxes you've paid. Embracing inaction can be a virtue.
TL;DR
1. Define your investment goal (e.g., outperforming the S&P 500 by X% or achieving a 20% CAGR over 10+ years).
2. Define your own investment philosophy (long-term approach, Saul-like, or whatever suits you), and stick to it vigorously.
3. Develop a robust investment thesis for each company.
4. Keep writing notes each quarter, especially if the thesis remains intact, and review them during moments of doubt.
5. Keep reading and learning like crazy.
Hope this helps!
Interesting, although I can still see little change. You write that your biggest loss was -64%, but the wikifolio shows -74% https://www.wikifolio.com/de/at/w/wfopfmetfs?src=search_top&searchTerm=MORITZ%20DREWS#keyfigures
You really need a strong stomach and a lot of great slogans. You have only really held a few stocks. You bought a lot back at a high price and it has nothing to do with conviction.
I find your new approach very interesting: "This means that my primary focus is investing in the people, the leadership, and the culture behind great companies.
I was even more surprised when I saw that you invest in the biggest live casino operator. Yes, nice value at the moment, which you never had in your portfolio before, but "leadership" and "culture"? I don't want to put ethical investing up for discussion, but anyone who bets on "leadership" and "culture" and buys Evolution should define these points very precisely and question them. In times when money is scarce, even more money is gambled away in the hope of hitting the jackpot. Somewhat similar to your whole process in recent years.
Don't take it amiss. You will probably think of your Growth Mindset that you mentioned here https://www.happyinvesting.pro/p/underperformance-dein-ego-gegen-den-index
Wikifolio doesn't include all stocks and trades I made since Wikifolio doesn't let you buy all companies available on the world wide stock market, and therefore doesn't match my real portfolio 1:1, that's why performance differs.
Regarding Evolution - I suggest researching more about the people behind the company, especially its CPO.
it is up to you. I am still wondering about EVO regarding your quote, but if you think this CPO is reliable (coming from MGM), that EVO is ethical and within the 20 best companies out there to own, it is ok for me.