jeudi 13 mai 2021

A cautionary tale

Many years ago, I taught many things I knew about the stock market to one of my friends.

He opened an account and started buying stocks I recommended to him. Mostly blue chips. 

That's not a new story, I've written about that many times before. But there's a whole new chapter in the story, and if that story was written by Stephen King, it would be the chapter where the monster shows. 

So, my friend eventually sold everything I told him to buy and started to buy more adventurous stuff. Then, it was speculative stuff. Then, it was crazy stuff. 

Everything was fine and funny. My friend sometimes called me to tell me how a great day it was for his portfolio. Sometimes he made something like 20 000$ one day, then 10 000$ the day after... His life was perfect.

But, in february 2021, a market sell off happened. And all the stocks he owned got hurt like fuck. They didn't really recover in the coming weeks. 

Then, the may selloff hurted his portfolio even more.

In february, he had a portfolio of 1,1 million dollars.

Yesterday, the portfolio was slighlty under 200 000 dollars. 

And, worse, he used margin like there was no tomorrow. So, the market selloff forced him to sell many, many shares.

And, even worse, he managed his father holdings. His father is something like 75 years old. And all his portfolio went down too. 

My friend told me yesterday that he was freaking. He had dark thoughts. 

Pretty sad story, but fuck, I told him many, many times to not buy that kind of stocks. I actually told him that I would NEVER buy that kind of stocks when he asked for my opinion. But he bought these stocks anyway. 


Since the beginning of the year, my portfolio is still positive (not by much, but positive anyway). He's down 90% since february with margin calls, day after day.

That's exactly what happens when you see the market as a big casino. You really want high emotions? You'll get them. But be sure to play with money that doesn't matter to you. Otherwise, you're going directly to depression or suicide. 

Use that story as a reminder: if you buy nonsense stuff, you'll eventually get nonsense results.

This is perhaps the most important post on that blog. 

4 commentaires:

  1. Well said. Simple but not easy.

  2. I've realized that in the beginning, friends will do what you advise them to do in markets but with time they will do something else.

  3. This is why I don’t manage my friends money, or even my wife.

    If you want to do that, just buy them a balanced portfolio of ETF.

  4. Yes, stick with great companies with good ROE , profits and revenue.