If we stipulate an 80% drop, then essentially none of us would invest in stocks, thus foregoing the opportunity for riding the equity-market upwards. It becomes a head-for-the-hills frantic effort at self-preservation, instead of a patient faith in the vitality of markets.For that 2.5 millions on those individual stocks
A) If they drops by 80%, aka you lose 2 millions, what does that do to you financially?
B) If they double to 5 million, what does that do to you financially?
If you are being honest, you will say (A) matters to you. (B) will hardly make a difference.
If that is the case, what is the point holding on to them?
If you lose, it will hurt you financially. If you win, it won't matter. There are marginal utility to you.
When you won the game, you should stop playing...
KlangFool
As for the question of doubling, and how it matters financially, the answer might be: it actually "matters" zero, in terms of standard of living. But it matters vastly, psychologically. If I'm not making every reasonable effort to grow my money, I'm a dissolute and irresponsible steward of it. Maybe I shouldn't have it in the first place? Not always is the objective, to feed or house oneself. Sometimes the objective of money, is money itself...and the furtherance of that, necessitates the taking of risks. There is no "winning" of the game... the game is perpetual! Every incremental victory simply sets up the quest for the subsequent increment. If that means occasionally taking a loss, that is regrettable, but also inevitable.
Klangfool, please ask yourself this: suppose that you had $1B. What would you do? Would you stop investing? Would you put it all in TIPS?
Statistics: Posted by unwitting_gulag — Wed Feb 14, 2024 1:33 pm — Replies 30 — Views 3290