Today, Howard Marks released a new Memo, “Selling Out.”
Here’s a quick “all you need to know” summary👇🏼
Here’s a quick “all you need to know” summary👇🏼
Why Do People Sell?
There are two main reasons:
1. Selling because the stock is up
2. Selling because the stock is down
Let’s start with Number 1.
There are two main reasons:
1. Selling because the stock is up
2. Selling because the stock is down
Let’s start with Number 1.
1. Selling because it’s up
People tend to realize gains out of fear the profits might go away (Loss-Aversion).
We want to avoid the feeling of regret and embarrassment.
And we hate getting something taken away that already “belonged” to us.
In this case, the profits.
People tend to realize gains out of fear the profits might go away (Loss-Aversion).
We want to avoid the feeling of regret and embarrassment.
And we hate getting something taken away that already “belonged” to us.
In this case, the profits.
2. Selling because it’s down
Similar to the fear that gains might vanish, there’s a fear about letting losses compound.
Imagine being the only one who kept holding a losing stock for months.
Everyone will think you’re an idiot. It was so obvious you were wrong.
Similar to the fear that gains might vanish, there’s a fear about letting losses compound.
Imagine being the only one who kept holding a losing stock for months.
Everyone will think you’re an idiot. It was so obvious you were wrong.
Especially in markets that are heavily driven by retail investors, as the last couple of years were, this is the case.
Because retail investors tend to be trend-followers.
They buy into appreciating assets and sell out of losing ones.
Because retail investors tend to be trend-followers.
They buy into appreciating assets and sell out of losing ones.
When should investors sell?
If you shouldn’t sell when the stock is up, nor when it's down, when should you sell?
The answer:
It depends on the health of the company.
Remember, you don’t own a piece of paper. You own part of a business.
If you shouldn’t sell when the stock is up, nor when it's down, when should you sell?
The answer:
It depends on the health of the company.
Remember, you don’t own a piece of paper. You own part of a business.
When you sell should depend on how the business is going.
Is your thesis playing out?
Are there better opportunities out there?
Do you still feel comfortable owning that company?
These are the questions you need to answer.
Is your thesis playing out?
Are there better opportunities out there?
Do you still feel comfortable owning that company?
These are the questions you need to answer.
The bottom line:
- We should base our investment decisions on our estimates of the businesses well-being
- We shouldn’t sell based on price movements
- We shouldn’t sell to time the market
(“Time, not timing, is the key to building wealth in the stock market.” - Bill Miller)
- We should base our investment decisions on our estimates of the businesses well-being
- We shouldn’t sell based on price movements
- We shouldn’t sell to time the market
(“Time, not timing, is the key to building wealth in the stock market.” - Bill Miller)
In case you want to read the Memo (You should!), here’s the link to all Howard Marks Memos:
oaktreecapital.com/insights/memos
And here’s a Thread of me summarizing “The Most Important Thing”😉 out of many of them.
oaktreecapital.com/insights/memos
And here’s a Thread of me summarizing “The Most Important Thing”😉 out of many of them.
https://twitter.com/MnkeDaniel/status/1440319591842926598
If you liked this Thread, I would appreciate your support by Linking and Retweeting the Thread.
Thank you very much!
Thank you very much!
You might find this interesting, although you probably read the whole Memo anyway 😁
@heymaxkoh
@GSpier
@DividendGrowth
@ValueInvestorAc
@Paul_Wildcat
@SteadyCompound
@honam
@realdennishong
@heymaxkoh
@GSpier
@DividendGrowth
@ValueInvestorAc
@Paul_Wildcat
@SteadyCompound
@honam
@realdennishong
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