I am Having a Great Year: Stock Gods, Plz Don’t Kill Me
My portfolio is up 41% this year, which is awesome. I know everybody is a genius in a bull market, but don’t bring me down. I was pretty much in line with the QQQ and the S&P, but then I had a spectacular November. Before this month, I was beating the S&P by about 4.5% and the QQQ by about 2.5%. Then, this month happened. I have grown my portfolio by 15% in this month alone, while the broader market has increased by 5%. While my increase in dolla bills due to this month is fun to talk about, there are lessons to learn beyond my indolent navel-gazing.
Lesson 1: Fortunes can change very quickly. Quite a bit of my money-making this month has stemmed from IonQ, an extremely volatile quantum computer company. My portfolio pretty much always does 1.2-1.8x whatever the market does, positive or negative. I am fine with this arrangement because the general market always trends upwards. This idea is why TQQQ is 11% of my portfolio. Even though I believe in IONQ, this company is still incredibly fresh and young. They have little (or maybe no, I need to check) debt, so I am not worried about them going bankrupt tomorrow, but if Google, Amazon, Microsoft, etc… choose to enter this market with the full weight of their money, IonQ would surely lose out.
Also, IonQ is a hardware, software, and services company doing some super advanced stuff. There is just so much that could turn this mega-positive momentum into mega-negative momentum. My position is up 60% so far, but that could change oh so quickly.
Lesson 2: Buy at the top of the wave, if the intrinsic quality of the company is solid. When I bought IonQ, the stock was up 90% year-to-date and up 60% over the previous eight days. I was a bit worried that I was buying at the top, and in some ways, I guess I was, but then the stock popped 60% from there. Now, that does not mean to be stupid. A company like MicroStrategy for example is a certified, mega-bankruptcy, worthless nothing company. Buying them at any price would qualify as being overpriced, but buying a company like Costco, Ferrari, Microsoft, or apparently IonQ at any price could be defensible as a good buy because of the company’s intrinsic worth. If I had waited a month for the price to fall, I would have lost out on a good chunk of money.
Lesson 3: Take so much risk. Do not act like the chumps on r/wallstreetbets, but you should take risks. The humans that exist on this planet today are here because our ancestors were all cautious when they were cavemen. Every animal has evolved to be cautious, sometimes overly so, in order to survive. To survive takes caution, but you are not just trying to survive. You are trying to make a bunch of money out of not very much money. The most you can lose, unless you are trading options and are leveraging yourself too much, is the money you invest. That does not mean that you should take stupid risks. You know what is a stupid risk and what is not a stupid risk. You know when you have under-researched a company or when you are putting more money than you are willing to lose into too volatile an asset.
I know that was a bit IonQ-focused, but I think the company and stock are indicative of others like it. And if it is not clear yet, you should buy IonQ or a stock like it. You should throw in a smaller company with high upside and high risk to balance out a more conservative approach.
