#neversell Gets You Through DrawdownsThe Acquirer's Multiple
During their recent interview on The Acquirers Podcast with Tobias, Matt Cochrane, Lead Advisor at 7Investing discussed #neversell Gets You Through Drawdowns. Here’s an excerpt from the interview:
#neversell Gets You Through Drawdowns
Matthew: I think that philosophy, never sell, it can get you through those times. Especially, 7Investing, we’re really for individual retail investors. We want to be champions for them. That’s something as an individual investor, you don’t have to answer to other people. You’re not managing other people’s money. You don’t have to answer if you have a bad quarter, or two bad quarters, or you don’t have to answer to that. You’re just answerable to yourself. You’re accountable to yourself. If you don’t have anyone to answer to and you really know like, “Okay, I understand what’s going on. I understand why the stock price is down.
I get why the market is dinging this company right now but these are short-term problems that it’s going to work through.” That philosophy, that underpinning of never sell of long-term buy and hold investing can get you through those kinds of problems. You’re an individual investor. You can add at these dips. You don’t have to establish a position once and for all. You can never add to that. Most people in their working careers are adding to their portfolios regularly, and if you can do that, then these are great opportunities to add a company and to add to a position. So, I think never sell gets you through a lot of those short-term problems that every single great company has ever had.
Tobias: And that’s why you refer to those particular periods, that’s the prescription in the sense that don’t be scared out of the position, because there’s some short-term issue or the stock’s down. In that instance, just follow the rule that you never sell, and then, when you’re a little bit cooler or something like that, consider the exact nature of the problem that you’re confronting and whether this is a permanent issue you should therefore, sell out of all temporary and keep holding.
Matthew: 100%. You can’t be scared or drawdowns. They’re going to happen. think every great Investor ever has had those periods. If every good company has that, every investor has them. It’s gut wrenching. It’s gut wrenching when your portfolio falls or when a company in your portfolio falls. I remember having some real values of doubt like, “What am I doing?” Especially, early on. Especially, and I think for newer investors, that’s the biggest danger because my portfolio now, I’ve been very blessed, I’ve done very well over the last few years. It’s been a great market.
I can’t imagine drawdown that takes me under the amount of money I put into it. But when you’re a new investor, and you go below that level, it’s gut wrenching. You will have those periods like, “What am I doing? I should just index or I shouldn’t invest at all because the market is rigged.” You’re going to go through those periods. I think everybody does. I think everybody does. Not everybody gets in at a great time. So, I would say you have to understand, though, that is the cost of playing this game, and you’re going to have those drawdowns and it’s never fun. It’s always painful. But if you’re invested in the right companies, you’re going to get through it.
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