The Drawdown
The Price of Admission
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If you’re new here, I share “buy-and-hold portfolios” that I believe can double in 3-5 years.
Here is the performance of our 2 current active portfolios:
In Coffee Can 13, 8 of our 19 bets doubled at one point. They have given back some of these gains, but I still like them going forward for the duration of the Coffee Can timeline:
Stocks: SMLR, UPST and HIMS
Calls: BABA MSTR BITX and DIS
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The Drawdown
Every investor starts with a vision of success.
You will study the markets diligently and build a diversified portfolio.
You will make smart, calculated decisions based on thorough research.
Your strategy will be sound, and your patience infinite.
It's going to be absolutely perfect.
Then, the market turns against you.
The charts that once pointed confidently upward begin their descent.
Your carefully chosen positions start bleeding red.
You watch your portfolio value shrink day after day.
The experts on television speak of "market corrections" and "healthy pullbacks," but this feels different.
Your conviction waivers.
Was your thesis wrong? Should you have seen the signs?
The doubts creep in like a rising tide.
The Drawdown is when you question every decision you've made.
The Drawdown is when you obsessively check your portfolio at 3 AM, hoping the Asian markets will bring relief.
The Drawdown is when you can't bring yourself to open your brokerage app, but you do it anyway.
The Drawdown is when you start believing that maybe you're not cut out for this.
The Drawdown is when your spouse asks about the investments, and you change the subject.
The Drawdown is when you begin to understand why they say the market can remain irrational longer than you can remain solvent.
The Drawdown is when you write down all the reasons you bought in, but they no longer seem convincing.
The Drawdown is when you watch others panic sell, and you wonder if they know something you don't.
The Drawdown is when your long-term conviction meets short-term pain.
The Drawdown is when you realize that all the backtesting in the world couldn't prepare you for the emotional reality of losing money.
The Drawdown is when you start bargaining: "I'll sell everything if it just gets back to break-even."
The Drawdown is the space between what you thought you could handle and what you actually can.
The Drawdown is not loss, but it feels like loss. It's not failure, but it tastes like failure.
The Drawdown is when your confidence evaporates faster than market liquidity.
Most investors are not prepared for The Drawdown.
Every great investor from Benjamin Graham to Warren Buffett has faced The Drawdown and survived. But that knowledge doesn't make yours any easier to bear.
The Drawdown is where paper hands turn to diamond hands, or where diamond hands shatter completely.
The Drawdown is where investing transforms from theory to reality. It's where you discover what kind of investor you truly are.
Some will emerge stronger. Many will not.
The Drawdown is not defeat, but it precedes victory. Especially if you are weak. Always if you are weak.
The Drawdown is where legends are forged, or where accounts go to die.
Most people are not strong enough.
But The Drawdown is the price of admission to long-term investment success.
Inspired by “The Struggle” by Ben Horowitz
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