If you KNEW you had a 10-bagger.... (stock, interest)
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Peter Lynch was the first I saw using the term "10-bagger".
Have you ever owned one? I guess I could qualify because I owned 3M for 30 years and got 16 bags. But I was pretty young and pretty broke when I bought it so there wasn't much money inlvolved.
I have a "5-bagger". Bought BEAT at 17, 4 years ago. close to 80, now.
What would you do if you KNEW that you had one? How would you handle it, and how would you sell it? The possibilities are all over the place, but what would YOU do? Giving your age group may help the discussion. I'm 73 so my thinking may be different from yours....
OK. 10 bags in 5 years. What would you do?
Peter Lynch himself says that you shouldn't necessarily sell a stock just because it had a huge run. He points out that you still have to look at the company and where it is going. That Philip Morris went up a lot and people sold, only to continue to sky rocket.
It doesn't hurt to take some off the top after a big run, but if the company is doing well...hold some.
Peter Lynch himself says that you shouldn't necessarily sell a stock just because it had a huge run. He points out that you still have to look at the company and where it is going. That Philip Morris went up a lot and people sold, only to continue to sky rocket.
It doesn't hurt to take some off the top after a big run, but if the company is doing well...hold some.
I just looked up ol' Pete. Wondered how he was doing.
Born in 1944, degrees in History, Psychology, Philosophy and an MBA from Wharton.
Net worth 450 million.
Peter Lynch himself says that you shouldn't necessarily sell a stock just because it had a huge run. He points out that you still have to look at the company and where it is going. That Philip Morris went up a lot and people sold, only to continue to sky rocket.
It doesn't hurt to take some off the top after a big run, but if the company is doing well...hold some.
Learned a lot from Lynch, but if you're still investing his way today you're probably not doing so hot.
Forget the 10-bagger. If you really want to do something impressive just go your entire investing career without a single down year.
I know a lot of people who tend to hold long-term don't sell, but once their multi-bagger has had a good run they'll sell off just enough to get their initial investment back.
From a performance standpoint it doesn't make a lot of sense, but from a psychological one it takes the pressure off. Then it's almost like you have free money in your remaining investment and could care less if it went to 100 or zero.
I guess another ingredient in this discussion is, "How much money will be 10 bagger be, and what portion of my wealth is represented by that stock?"
The answer to that question makes a whole lot of difference, just like the discussion of risk tolerance does. I have the risk tolerance of a riverboat gambler, but the other half of my family does not. So we locked down enough assets to keep her going forever and that gave me the freedom to do other things.
...I know a lot of people who tend to hold long-term don't sell, but once their multi-bagger has had a good run they'll sell off just enough to get their initial investment back.
From a performance standpoint it doesn't make a lot of sense, but from a psychological one it takes the pressure off. Then it's almost like you have free money in your remaining investment and could care less if it went to 100 or zero.
Psychology ruins us all. Speaking personally, my beholding of capital resets at every successive new high, so that decline from said high, feels like a loss. Even if I sold 90% of my holding by prescient intuition at the absolute apex, and then watched the remaining 10% decline, it feels like a loss.
None of this money is outright "free". Money earned from prior money is simply wage-labor one-degree removed. It's all at risk, and it's all intimately personal.
Quote:
Originally Posted by Listener2307
I guess another ingredient in this discussion is, "How much money will be 10 bagger be, and what portion of my wealth is represented by that stock?"
Exactly. If one allocated 2% of one's portfolio to a given stock, and it rose by a factor of 10 over one decade, that's fantastic... but ultimately trivial. What happened to the remainder of the portfolio?
As one's portfolio rises, one becomes more conservative and risk-averse. The issue is less about one's chronological age, than about assets-to-income ratio. For a person earning $100K with $100K invested, a 10% hit in the portfolio can be recovered from one year's savings. For a person with $10M portfolio and a $10K/year job, a minute's market-fluctuation overwhelms a year's earnings.
Psychology ruins us all. Speaking personally, my beholding of capital resets at every successive new high, so that decline from said high, feels like a loss. Even if I sold 90% of my holding by prescient intuition at the absolute apex, and then watched the remaining 10% decline, it feels like a loss.
None of this money is outright "free". Money earned from prior money is simply wage-labor one-degree removed. It's all at risk, and it's all intimately personal.............
This feeling of loss is intolerable to some people. That drives them to become savers as opposed to investors. And savers - I want to say this carefully - usually become poorer as they grow older.
Savers practice only one discipline. They make money and take a portion of it and place it where it will be safe. They find it impossible to reverse that process, in that they virtually never spend their savings. Usually they are unable to bring themselves to even spend the interest earned. They simply save forever.
Only the most successful of investors will learn to reverse the process. A glance around this forum will show you that many investors are concerned with how much of their portfolio can safely be removed and spent; they know how to put money in and they want to know how to take it out. Handling large sums of money is not as easy as it sounds. Fear of loss, dependency on uncertain future gains, and failure to calculate burn rate are some of the problems that come to mind.
The phrase, "And then I would retire", actually raises more questions than it answers.
I retired in 2010.
This feeling of loss is intolerable to some people. That drives them to become savers as opposed to investors. And savers - I want to say this carefully - usually become poorer as they grow older.
I'm constantly amazed at how few from my generation are even in the market (outside of say a 401k through work).
I get that student loans broadsided a lot of us, but after you get out from under them I'd think you'd want to really start living life.
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