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1/ Lots of my smaller bets were showing 15-20% annualized forward returns when I bought them earlier this year & are showing 0% to negative returns right now after the recent run up. It's a difficult spot to be in because I don't want to trade in and out of stocks yet...
2/ ... I do want the maximize my returns. This is one of the benefits of ETF's like ARK in that they are constantly optimizing for performance (every day) and the investor doesn't have to worry about capital gains, along with other benefits, for a nominal fee.
3/ This also leads to other theoretical questions about what type of portfolio you are trying to build and who you are trying to emulate. For example, it is clear to me and any sensible person that $WIX is showing a better 5 year annualized return right now than $SHOP.
4/ And yet I'm not sure I believe that $WIX is a better buy in the context of a portfolio if the intention is to hold for the long term. My philosophy has always been to own the clearly dominant businesses even if that means paying up...
5/ ..as long as there still is a lot of revenue growth ahead. The key would be to average out the cost basis over time into a full position. Start small and then continue to add.
6/ This is a different approach than someone like Pat Dorsey, who's main goal is to outperform in the short term, and will frequently buy (and then eventually sell) the 2nd place business if it is showing better forward returns.
7/ There is no right way or wrong way and everyone has a different approach. For me, I try to remind myself that the x-axis in a stock's chart is Time. If the stock doesn't perform in the next 12 months, that just means returns will be squeezed into the next 4 years & anyway ...
8/ ... the better business will usually outperform by a significant margin over a long enough period of time.
Credit to my Fintwit friends for helping me see the light around this topic.
Credit to my Fintwit friends for helping me see the light around this topic.
