Easy? I wouldn’t say so.
Take a look below at Amazon…share price
Between its IPO in 1997 until 2017, Amazon rallied 38,600%, compounding annually at 35.5%.
So, if you had invested $1,000 into Amazon shares in 1997 and held it all the way to 2017, your investment would have turned into $387,000.
However, Amazon lost 50% or more of its value on 3 different occasions.
One of these occasions is during the dot-com bubble when Amazon lost 95% of its value!
Between December of 1999 through October 2001, your $1,000 investment would have went from $54,433 to $3,045.
Most likely not, assuming you were constantly watching the screens.
My question to you is, would you have had the resolve to hold the stock or even add to your holding ?
As you can see, being human is arguably what makes investing so difficult.
Take a look at the chart below…
Studies have shown that humans feel about 2.25 times more pain with losses than pleasure with gain.
This is why it is so difficult to hold on or buy more of the same stock when it is declining in price, even when fundamentals are the same or getting better.
Having said this, the biggest risk in investing is ourselves, which is why an invest-and-forget strategy works best for most people in the long run.
It simplifies the complexities of investing and ensures that you don’t fall prey to your emotions.
This invest-and-forget strategy is also known as having a coffee can portfolio, where you find the best stocks and just let them sit for 10+ years.
Again, the point of a coffee can portfolio is all about protecting you against yourself—from the emotions and volatility that make you buy or sell at the wrong times.
Your ONE well-researched, long-term investing decision that you make today is most likely better than the series of shorter-term investing decisions you make.
As you can see with Amazon’s stock price, hindsight is always perfect, but looking at a long-term chart and wishing you had invested in it is a fool’s errand.
Have a laugh at the cartoon below…
Truth is, even if you knew that Amazon was going to change the world, it wouldn’t have been easy to hold on whenever it crashed by more than 50%.
Again, becoming rich from investing in stocks is simple but not easy.
At the end of the day, how much you earn in your investments is directly proportional to how much you learn about your investments.
This is why I leverage professional investors’ research to make some of my investigation.
Chris retired in his late-20s, having turned pennies into pounds in asymmetric bets like…
- The New Zealand real estate (64x return)
- The last commodities bull market (10x)
- Bitcoin (20x)
- Shipping (27x)
He now runs a deep value hedge fund called Glenorchy Capital and shares his research with the wider investing community who cannot access his fund.
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