The Price for the Next 300% Up Move

Amar Pandit , CFA , CFP

I received some fantastic responses for “The Next 300%” post.

It was an “AHA” moment for many. If you have not read it, I would encourage you to check it out.

While we all know that the next 300% up move is upwards, we also should know that there is a big price to be paid for it.

The price is paid by riding the volatility that one is likely to encounter on the path to the next 300%. I do not know what kind of volatility we are likely to encounter but let us assume some of the worst in recent history. The ones you witnessed in 2020 or even in 2008-2009. We all know how they have played out after going down. When you are in it, the world seems like it is coming down. The key here is to fasten your seat belt and sit tight despite all the gloom and doom noise around you. This is easier said than done but this is the most important thing. This is where you need the handholding of a caring real financial professional. This person is your guide in a changing and uncertain landscape.

Even if there are no crashes like we witnessed in 2008-2009 and in 2020, we should factor in a couple of corrections along the way. These things are normal just like turbulence during a flight is, we do not know whether turbulence will happen or when it will happen. We only know that it might happen and if it does happen, it is normal and the best way to navigate one is to fasten our seat belts and sit tight (and let our financial pilot help us navigate out of it).

Sometimes, there is yet another price to be paid. I would say this scenario is even more challenging for many naïve investors than the crashes or deep corrections. In this scenario, the markets do not move much and are within a band and sometimes flat or down 5-10%. People who have invested for 2-3 years or more see a negligible (2%) return or a mildly negative one. They question their investment and interrupt the compounding process. There are years whether nothing seems to happen and then there are weeks or months where years happen. This is the reality of compounding and investing. You must be ready to pay the price by being super patient. This is the scenario where many investing mistakes happen, and your patience is tested at a different level. Your success in investing will also be determined by how well you navigate this phase. The currency of the price paid here is $PATIENCE. Once again, a real financial professional will help you sail through these boring times by helping you build your $PATIENCE reserves.

Morgan Housel in his essay “Too much, Too soon, Too fast” wonderfully summarizes the price to be paid. He writes “A good summary of investing history is that stocks pay a fortune in the long run but seek punitive damages when you try to be paid sooner. Virtually all investing mistakes are rooted in people looking at long –term market returns and saying, “That’s nice, but can I have it all faster?

While we all would love to have it faster, no one ever gets it sooner without paying the price that needs to be paid. If anyone gets it sooner, chances are it will be taken away sooner too. Even the wisest pay this price and so would all of us. The Exceptions (people who do not want to pay this price) are in Fixed Deposits/Bonds paying a very different price.

Like always the choice is yours.

Which one do you want to Pay?

The One in $PATIENCE and $VOLATILITY or The One with REAL RETURNS.