Getting Beat By Patient Moms Who Love Facebook

May 29, 2017
J. Webster
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This paragraph at the end of Howard Lindzon’s blog post shouldn’t be overlooked – it’s not a throwaway paragraph or idea, I think. It’s rather important.

The market is a humbling place. You can work millions of hours reading and writing about the markets and be beat by a kid that loves the chips that power his gaming computer (NVidia and AMD) or mom that loves Amazon and Facebook.

Is there a Mom or a millennial just starting out in investing who loves and believes in SnapChat and is willing to hold on to the stock for ten or twenty years and will be right? Will win the stock lottery. Or is there someone out there who just loves Chipotle burritos and believes the stock will recover and become like McDonald’s? Or is there someone who loves ShakeShake hamburgers and is going to hold on to the stock for ten years and believes it will become as big as McDonald’s?

Just throwing out a few examples, but I think it’s good to think of some of your stocks in your portfolio as lottery picks. A few stocks that you’re hoping hit the jackpot and you’re not going to sell, but ride the ups and downs. As Jim Cramer said a while back, don’t trade Apple’s stock just own it. There are some stocks that you want to set aside and hold on to for the long term. Almost forget you own them.

But just how long…does anyone really know or who can predict this. It’s not easy. It’s very hard. Who thought Domino’s pizza who could from $5 to something like over $200 a share in about ten years.

There are some who say this idea, that you can get rich by just putting a chunk of money in a stock and hold on for the long run isn’t good for investors to think. They think there are just as many who’ve picked bad stocks and lost all their money. They are are smarter investors than me, but I still say it’s smart to buy certain stocks and forget you own them.

Marc Andreessen, while On Barry Ritholtz’s great Bloomberg podcast, talked about how everything came true during the dotcom era. It just took a while and a lot of companies had to get crushed as in Pets.com for example. But even the pet food industry even worked out if you’d picked up some Chewy.com shares. PetSmart bought Chewy.com for $3.35 billion in the biggest e-commerce acquisition in history.

You don’t have to hold on to the stock forever, although that might be wise, just ask Warren Buffett, but even if you bought Facebook’s IPO, which sunk until they figured out mobile and bought Instagram and WhatsApp, you’d have seen a very nice return. I think the idea is that you don’t want to get scared out of a stock when there are ups and downs. Don’t panic sell.

It’s not entirely about winning the lottery with a stock but maintaining a certain level of patience. If you’re a Mom who loves Facebook’s stock, you probably too busy working and raising a family to watch CNBC every day and follow all the news on Twitter about your stock, so then you’re less apt to trade in and out of it. I’ve always joke that TD Ameritrade should have a locked feature in their trading platform, say you can’t trade in and out of this stock. Remember when shares of Starbucks sunk during the Great Recession….if only you’d just kept that stock when you bought near the lows…

Again, it shouldn’t be all of your money put into one stock and then praying that you get rich, but a chunk of money in Amazon, Google, Apple, Netflix, Facebook, a five or ten years ago, isn’t a bad risk to take. There are many who have held on for a long term and are very happy.

I picture the wife of an investment banker who bought shares of Facebook despite her husband telling her to skip it. And she has held on to her Facebook shares since the IPO and her husband is wishing he had listened to her. He jumped in and bought Facebook stock near $80, but then sold it as it just keeps hitting new highs.

If you’re losing money and sell a stock and it then goes up, there’s even a tendency in some traders to try to win the money you’ve lost back right away. To trade more. The Mom who owns Facebook shares because she loves it just holds on to the stock and doesn’t get as emotional and trade all the time.

I remember talking to an older guy at the gym, well past retirement age, he said he liked stocks and companies that make stuff or pull stuff out of the ground – meaning resource type stocks. But then he want on to say his wife forced him to buy Facebook.

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