During my school days, I noticed that there is a tendency among the ‘good students’ showing how ill-prepared they are for a test or exam. When the results are out, these ‘good students’ performed well and often better than expected. Sometimes I just find it amusing yet intrigued by this behaviour. Perhaps it is a human instinct that we will want to exceed expectations showing our best side. Just like in today social media, there is a lot of posts showing the high returns they get from their investments. Be it crypto, stocks or other assets they invest in. Do they suffer losses in their portfolio too? People make mistakes. We are bound to make some losses in our investment at a certain point in life. The next time when you read that someone has achieved double digits or even triple digits annual growth in their investments, they probably have some ‘rotten apples’ sitting in their portfolio currently or previously. I know I have.
Rotten apples in my portfolio
I had some really good investments that I continue to keep in my portfolio for years and also some bad ones in my yard. I bought Qudian (NYSE:QD) back in 20Nov2017-24Nov2017, got the shares at 100@$21, 250@$20, 150@$17 & 200@$13.50 respectively. When the share price went south, I bought more thinking that I got a good deal for such an undervalued stock, I greedily thought it was just another Facebook. Fast forward to a year later, I had sold most (+80%) of my QD then subsequently the balance in Apr2021. The reason why I hold on to QD to Apr2021 because I still harbor the thought that it will recover. Trust me miracle just don’t happened especially in the world of investment. You just have to cut your losses and move on.
I had lost close to 10K USD in absolute dollar term and +80% of my initial capital. Also do not under estimate the importance of opportunity cost, the capital could have deploy to other better investments or even fixed deposits which allows my capital will be preserved. Looking back, I had invested in QD because it was a high profile fintech online Chinese company providing short term micro loans to college students and white-collar workers. Loans are instantaneously approved as QD uses data analytics to assess prospective borrowers instead of using traditional financial metrics to assess a borrower’s credibility. Despite being a disruptor in the lending business dominated by traditional banks, QD business model does not sit well with China increasingly tough regulatory requirements environment. Within the next few years its stock price starts to spiral down to the bottom.
I learnt that in the journey of investing is just like driving a car on the road, there are bound to have bumps and humps along the asphalt concrete surface. It is never a smooth journey, sure sometimes you may encountered a flat tyre or engine stalled halfway during the drive. The key takeaway from this while choosing the right stocks is important, knowing when to cut your losses is critical as well. Learn to ride over the bumps (not as easy as it sounds). As long as you are willing to take the step out and keep going, you will reach your destination eventually. Let’s strive to meet each other on the other end of the road trip:)
SG RR is just an average guy aka rat working his way out of the rat race. A perfect day for him is one spent watching movies, walking at the park, and thinking about his finance.
Together with his wife (rabbit), they embark on this journey and to share what they know or have to the rest of the community.