Edition #11: The Wolf and the Woodsman

Plus: reacting to market dips, updates to my portfolio, and how to earn Bitcoin by shopping
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WRITTEN BY OZ CHEN

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Hey there, you’ve got diamond hands.

Thanks to those who responded with “1-pager” to last week’s email. I’m thinking of covering either Coinbase or Matterport. Let me know which company you’d most like to see a 1-pager stock analysis on—I might just pick yours.

  • Last week, I talked about financial self comparison.
  • Today I’ll tell you a parable, reacting to market dips, updates to my portfolio, and how to earn Bitcoin by shopping.

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The Wolf and the Woodsman

A woodsman happened across an injured wolf, trying to cross a stream. The wolf asks the woodsman if he can carry him across the steam. “But you’re a wolf, won’t you bite me?”

The wolf argued that if he did, neither of them will make it across the river. The woodsman is convinced. He also pities the wolf, who looks like an injured dog. The woodsman carries the wolf across the stream.

When they nearly reach the end, the wolf suddenly bites the woodsman.

Shocked and bleeding, the woodsman exclaimed “But you said you wouldn’t bite me!”

The wolf responded: “I couldn’t help it. I’m a wolf.”


Tech and growth stocks tend to be volatile investments. Doubly so if you own individual stocks vs the overall index.

It’s all piñatas and candy when growth stocks explode. But when they dip and retail investors panic, it’s like my holdings say “I couldn’t help it. I’m a tech stock.”

There’s a special pain for investors in who realize they don’t know what they bought. Shit, has Lucid Air even delivered 1 vehicle? Does anyone give a shit about Beyond Meat?

I co-opted an old parable to remind myself: know what you are buying.

Corrections reveal conviction

Market corrections are like psychological stress tests.

When my portfolio goes through a major correction, my mind oscillates between two states of greed and fear:

  1. What’s on sale?
  2. What do I want to hold or sell?

The stocks I want to buy more of are the companies I truly believe in.

When I think “nah, not gonna buy more” (cough SPACs), my short term trades are revealed. Typically, these are shiny stocks that I bought based on trends or momentum, and aren’t necessarily businesses that I believe will survive in the long term.

In WallStreetBets parlance, one may have paper hands or diamond hands depending on the level of conviction in their investment.

If you’re experiencing buyer’s remorse, then it helps to get some perspective.

When in doubt, zoom out

If you look up the stock price, the default time line is set to 1 day. This reinforces recency bias, or the focus on short price movements over historic trends.

Over the long term many stocks are still way, way up.

To last week’s dip, Nick Maggiuli observed that meme investor do not represent average investors. They’re just louder on Twitter:

We typically tweet about the meme stock that tripled in a week or the 100 trillion pixel image that sold for $17,000 instead of what actually impacts our financial lives.

Of Dollars and Data

I’m learning that it’s important to curate my attention as an investor. I’ve found it helpful to trade fast information (Twitter, Discord channels) with slow information (CEO interviews, in-depth podcasts).

This is why I’m going to practice writing 1-pagers for all the stocks I hold, and for any future stock before I buy.

My intent is to know what I’m buying, so that the wolves of wall street bare their fangs, I’m prepared.


Aside: congrats to y’all who have held through last week’s dip. As someone who has survived the crypto winter of 2018 (#bagholder), these are small dips. Bigger and more devastating crashes will come. Stick around on my newsletter for slow information.

Quote of the week

“A genius is the man who can do the average thing when everyone else around him is losing his mind.” — Napoleon

Updates to my portfolio

Here’s what I bought and sold recently. You can check out my portfolio on M1 Finance here.

  • Sold Clover Health (CLOV): I was disappointed when Chamath picked this as the merger acquisition target for IPOC. I don’t believe in Clover’s growth prospects and the CEO might be a medical villain. I’m much happier with IPOE’s target, SoFi, which is a product I actually believe in.
  • Added Nvidia (NVDA): I’ve been a fan of NVDA since the days of running GeForce2 graphics card on my Compaq desktop. They’re now squarely positioned as one of the leaders in AI and possibly also autonomous driving. I also just have to add the fanboy comment that CEO Jensen Huang is Taiwanese 🇹🇼. He’s a great speaker too.
  • Added ARK Innovation ETF (ARKK): Every tech investor has been following Cathie Wood’s famous fund. After subscribing to their daily trade updates, I realize the value add of buying their ETFs now: they make huge trades everyday powered by an army of farsighted analysts. I’m adding them as an expert tech stock picker within my portfolio.

Note: none of this should be considered financial advice.
Extra note: I use a variety of investment apps on the sliding scale from boring to nearly reckless: index funds in retirement accounts, M1 Finance for recurring buys of long-term stock picks, and Robinhood for YOLO investing.
This reflects changes to my M1 portfolio.

Money tip of the week: Earn Bitcoin while shopping online

I wrote a post about Rakuten, a shopping hack I use to get free cash back when shopping online. Now, there’s a crypto version of that called Lolli: earn “Bitcoin back” on online purchases.

The way it works is the same as Rakuten or Honey. Add it as a browser extension and it’ll pop up when you’re on a vendor site that has a crypto cash back deal.

Use my referral link and we both get $10 in Bitcoin. And who knows, maybe that $10 will really be $20 in Bitcoin in just a couple months.


Afterwords

Enjoying the newsletter or wanna talk smack? Share it with a friend. I try to make it one of the best emails you get each week, and I hope you’re enjoying it.

Should you find anything interesting this week, send it my way! I love finding new things to read through you.

Good buy,
Oz

P.S. Which Oprah are you? I’ve been 1 all day.

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