The Amateur Investor. Ep 4: When to fold ‘em or Investing in the time of COVID-19
So let me preface this article by saying I have no idea what I am doing. At this stage, I have some idea of the ways in which companies operate from an investment perspective, how the value of their shares in the market can change in value, with a smattering of an understanding of how trading works. But still, I find myself feeling like a shipwrecked sailor swimming for land in the distance. I know I’m making progress, but the shoreline of understanding doesn’t seem to be coming any closer, especially with the current COVID-19 crisis still ongoing.
From an investment standpoint, I’ve witnessed a lot of the companies that I had placed on my watchlist plummet in share price. As part of my thesis-backed allocation strategy, I also placed a few hedging bets across a number of industries that I’ve seen fall pretty far in price. It’s disheartening to watch. In fact, in the words of my good friend and fellow Mockingbirder Hsuan, ‘It fucking sucks’. In broad strokes, a majority of the shares that I’ve invested in were in industries that I knew would suffer during the COVID-19 crisis, but would later come back much stronger than before as the economy began a push to recover from the economic downturn. The stocks were bought at what myself and a few others thought was an all time low, hoping that they would go no lower and we’d be in prime position to make profit when the market rebounded. However, we’ve found that in a number of cases, we got in at what turned out to be a false bottom, as the initial plateau took another steep plunge.
Like I said, it’s hard to watch. But something I’ve found helpful is to understand that for the most part, the decrease in price doesn’t affect my finances by too much. Sure, some of the shares I started out with aren’t worth as much as they were initially, but their loss of value isn’t costing me anything in real time. It just means they are worth less than they were originally, and when the market recovers, I’ll make out quite well. Hopefully.
On the other hand, I’ve seen a small number of my other holdings rise in value. An ETF (Exchange Traded Fund) that I bought into at the start of my investing career has seen a small rise of about 20% in initial value, which was quite a nice surprise. Other holdings have also seen a small gain, which is also quite encouraging. Initially, I was tempted to sell my positions immediately, in fact I’m still considering it. I’d make back my money and then some. But so far I’ve been able to stave off these urges by telling myself that the gains when the market bounces back will dwarf these small profits to begin with.
I keep having to remind myself that a lot of investing is based on gathering and interpreting information and above all, being patient. It may sound obvious, but when you’re looking at a 20% profit from a quick sale of your stocks against what could be easily 300% gain down the road, it can be hard to be patient. Which is why formulating some sort of investment plan is important, at least for me, to act as a guide to tell you when you would like to buy or sell, into a stock. I can’t tell you how to do that, I barely know how to do it myself. All I’m doing right now is keeping my eyes on potential investment opportunities, playing small, going slow and learning.
