Did you write down all your bets? Not just the winners, but also the losers?
This is a bias that a lot of investors often make ...
I think a lot of people are surprised when they start using a prediction market or prediction registry and track all their predictions, not just the ones they remember decades later. (I thought Google was a good investment in 2005 too. I thought a lot of things back then, but I don't remember what else I thought.)
Re:Timing Technology
by simonebrunozzi on Thursday October 17, 2019 @06:37PM
(#21286987)
That's true, and it's partially my bias as well, of course.
You could almost certainly have done better by borrowing money and buying the right kind of options. If you're willing to give up half the upside for a stop-loss, you would collect quite a premium and should more than offset even usurious interest rates.
You want exposure to 50% of the upside: this means you want exposure to 50k worth of each stock. You don't want to lose more than 100k total, and are ok being wiped out if both drop 50%.
Seems to me like you'd want to buy 25k worth of call options at a 50% strike price. The options would cost 25k and would reflect shares worth 50k. You get exposure to 50k of shares on the upside, but your loss is capped at 50k total, which is twice as good as your deal. All you need to do is pay interest.
Edit: let me give you a simple example. In late 2005 I proposed an investment to a wealthy relative: buy $100,000 of GOOG and $100,000 of BIDU. Any loss would be covered by me as debt, to be repaid over the next 10 years, with a stop-loss at -50% ($100,000). Any gain would be split half and half. Hold it for 10 years, then sell. Unfortunately my relative didn't accept. Baidu did 30x in 10 years. Google did ~6x.