What I learned from making a mistake in my investing this week

Recently I bought Fastly stock (symbol FSLY), and that wasn’t the problem. This was. 

I bought at the top and held onto it even when I felt like I should have gotten out and waited. 

Investing isn’t all about feelings. But we should follow our gut. Let me explain. 

My feeling wasn’t that I was afraid to lose money. I’ve taken positions that I felt fine or less un-fine when the stock price dropped, and I was “losing” money. I wrote a whole post about it here. That doesn’t bother me that much because I got the stock at a better price, or I was more confident that it would continue to go up. 

But when I bought Fastly, I didn’t. The same feeling wasn’t there. No, it didn’t feel right. 

The price was super high, shooting up all year. It was up over 500%. And it wasn’t clear if it would be able to keep up that pace. And I felt unsure about it.

But I got greedy. You know that feeling of I-got-to-get-in-too-so-I-don’t-miss-out kind of feelings? Yeah, FOMO. That’s what happened to me this week. So I jumped in, undisciplined and greedily. 

Now, I’m not saying I regret buying it totally and utterly. No. I regret buying it then, this past Tuesday for 133.50. Yes, I do. I bought way—too—high. 

There are times to buy a stock when it’s “high,” but this was not one of them, and my gut was telling me so. But I didn’t listen. 

Following your gut in the markets can be tricky. It’s hard to figure out. 

It takes time. 

For instance, when something inside of you that’s primal tells you (or screams at you) to sell a stock right after it drops because we humans hate to lose money, that’s not your gut. That’s different. That’s our lizard brain at work. And that type of thinking has a name. 

It’s called loss aversion. 

That means we feel the loss of money, or, really, anything, more than when we gain. It’s strange, but true. So when you lose $100, that will make you feel more pain than the happiness you would feel if you gained an equal amount. 

Loss aversion is not the gut.

The gut works with reason and experience. It synthesizes information in your subconscious, and it murmurs a quiet little voice that whispers hushed thoughts that help guide you. It lets you intuit things like a certain sector might catch fire (in a good way) or when a stock might be the right pick or, in this case, a stock price was too high to enter, and it’s better to wait. 

I’m not saying that Fastly isn’t a good investment. I think it is. I don’t believe that the stock price will go to zero and think the company will continue to grow. 

But I didn’t listen to that little voice inside of me this time. And now I must live with the consequences. The stock dropped 30+% since I bought it.

But it’s not the end. 

That’s what I love about investing in the market. A mistake needn’t kill you. If you learn from it, you can recover. 

You can even thrive. 

Learning is key.

Disclosure: None of this is investment advice or the like. It’s just one investor sharing his learnings and stories. Consult a professional advisor if you want help in investing.

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Why I think Fiverr’s stock will continue to outperform

When I bought the stock, it was not cheap. It had already had a significant run-up close to 500% or more since March. So yeah, I was super late to the party. But I don’t think this party is ending anytime soon. 

I think that Fiverr has a long way to run. 

In other words, this party is just getting started. 

I’m invested in Fiverr

I bought the stock when the price was in the $140s, going long in early October, and the position was a pretty decent size for me. It has had a good ride up so far.  And I just recently added to the position yesterday. 

As of this morning, it’s up close to 18 to 20%. That’s solid for less than a month of holding a stock. 

The prospects of how the stock will perform are looking very bright for Fiverr and anyone who holds a position.

Here’s why I think that.

Macro forces are favorable for Fiverr

We are increasingly in a digital world. People use websites more and more, not just to market their websites but to transact on them, communicate with their customers, create communities, etc. requiring a developer or designer or copywriter.

In the US alone, there are over 30 million small businesses. That’s not counting any of the other countries in the world. And that’s not including the larger businesses.

Also, people are starting businesses, amid the pandemic and the recession it caused, at a faster rate in more than a decade. 

And most of those businesses need someone to help them set up a website or a digital presence. And they won’t want to pay a company like mine or an agency to get that done for them—no. They will go to a small gig worker, a freelancer. 

They’ll go to Fiverr, or someplace like it. 

Fiverr’s a marketplace, which is a moat

They provide a marketplace for individuals and business owners to find freelancers to help them with their website or creative-services-needs that won’t break the bank. And that’s not the only thing that sets Fiverr apart.

Their prices are often otherworldly low. You can find a developer who is willing to put together a package that would build you a website for near to nothing, some for less than $100. It sounds absurd, but it’s true. There are all kinds of options for a scrappy small business owner.

Fiverr is a marketplace that isn’t just for the US, no. It’s for the world. Anyone who starts a business or has an established one can find a person to build an e-commerce website, produce a video, or design designs, create copywriting, etc.

And freelancers can find customers on Fiverr’s platform and work as they wish. They log into Fiverr from anywhere in the world, and they can be on their couch in their underwear or in a business suit at a high-rise office. They can be in a remote country or a first-world nation. It doesn’t matter. 

Fiverr also removes friction, which makes it a bigger moat

Fiverr is a two-way marketplace that connects freelancers with individuals and businesses, focusing on creating frictionless transactions. And that’s a magical place to be. This marketplace connects two different parties around a synergistic area. For Fiverr, that’s creative work. It essentially connects buyers with sellers and vice versa so they can do business and create something together. Fiverr makes it as easy as possible by removing friction on both sides.

Building a two-way marketplace is hard enough, but making it super frictionless is another. And it can make all of the difference.  

Look at Zoom. Zoom entered a space where huge incumbent companies were playing. You know, like Google and Microsoft. And many people and investors thought Zoom was crazy and didn’t think it could succeed. But they did. What set them apart was this. They were obsessed with making video conferencing easy to use. They focused on the user experience above all else. 

And because of that laser focus on the customer experience, they won. 

That’s what Fiverr has and is continuing to do. 

That’s why I believe they will continue to win. 

I’m betting on it. 

Disclosure: None of this is investment advice or the like. It’s just one investor sharing his learnings and stories. Consult a professional advisor if you want help in investing.

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When I made $100,000 in one trade

Investing isn’t just about betting. It’s about how big of a bet you make.

Size, here, does matter.

Investing $100 versus $100,000 makes a huge difference in the outcome. The former will make you some money, even if it’s a huge winner, or, by betting the latter, it can change your lifestyle.

I traded futures

One day I decided to short the market, which means I bet the market would go down. It was during a time when I was trading—a lot. I was making intraday positions and had some success in it. (It’s not how I approach the market anymore, really; that’s for another post.)

I traded the futures market. There are all kinds that you can trade. My favorite was the S&P 500 E-Mini (symbol ES). It tracks the S&P 500 and is traded almost 24 hours a day and is very liquid, meaning you can easily buy and sell your position. It’s also a simple way to bet on the market going up, or down.

Before I shorted on that particular day, I had been going long, thinking that the market would continue to go up. But I kept on losing money. After several attempts, I thought maybe the market wants to go down since, at that point, it was at or close to an all time high. So, instead of going long, I took a small short position.

Taking a winning position

The market slumped. And my position was winning. Then, I added to it. And it kept on winning. So I shorted more, adding to my growing short position in ES. Then the market fall accelerated in the last hour of regular trading as panic ensued. And I was shocked by how much money my trade made. By the time I closed my trade, after regular trading hours, I had made well over $100,000. That was in one day.

For me, it was incredible.

To make that, I had to take a large position. By the end of the day I had accumulated over $1MM worth of a short position in ES.

It was scary.

Winning can be scary

No one is saying that taking that big of a position isn’t frightening. I wanted to put on some man-diapers because I almost crapped my pants at least a few times that day—and, I was making money. It might sound so strange to hear that I was terrified when I was winning. But all I could think about was, What if I was on the other side of that trade. That haunted me even as I closed my position and took home my winnings.

And there’s a reason for that fear. It’s this: Taking large positions is terrifying, no matter what side you’re on. That’s because of the risk you are assuming when you take a larger position.

That’s why it’s important to gain conviction.

You need conviction

That means you get a sense that a stock or market or whatever will take a certain direction, and you have a strong sense you are right. You won’t be certain because that doesn’t exist in life; it certainly doesn’t in investing. But, you can form a strong belief. One of the best ways to gain that is by reading and researching. You’ve read about the market, weighed the various voices and opinions, including your own, and you formulate a conclusion. That is conviction. It’s a process. It can be done quickly, or it can take years. But to make your best bets, I think a conviction must be formed.

When I took that short position it was because I had been in the market and could sense that I wasn’t going to win going long. And then I started to see that I needed to do something different. Reading Market Wizards (affiliate), a book about trading helped me do that because I noticed that many of the traders I read about in the book would react to losing and quickly pivoted and go the opposite way. So I did the same.

One last thing about forming convictions, it takes time to hone. Conviction isn’t the same as intuition. You know, that’s the “feeling” someone gets when they think something is going to happen. It’s almost like voodoo magic. I’m not going to downplay intuition. It is a thing that works. But, I don’t think you can consistently win with just that. It plays a part of conviction but isn’t all of it. “Feelings” and facts are needed. Intuition is a feeling you might be right. A conviction takes that feeling and confirms it with research and reading and reflection—or they contradict that intuition. People who have an intuitive sense that is reliable are the ones who have been scouring the research and news and have had their pulse in the market and know their sector well. They are practicing the gathering of knowledge and learning. They even unlearn. If you practice all of that, you will train your senses to sniff out the best convictions.

Then you bet.

I accumulated

And you don’t need to take a big position at first. It can be small. Once you gain more confidence, you can grow it.

Your position size can be grown. It can be accumulated. That means you can take a smaller position at first, then add to it over time as you gather confidence. So you don’t need to plunge into a stock or a futures position, no. You can just dip a foot in, then add your leg, and once you see it’s right, dive into the pool.

That’s what I did on that day I shorted.

And this isn’t for everyone. It is risky.

Learn how you best risk

You need to account for risks.

One key variable you need to consider when you do that is yourself. What type of risks do you do better in? Are you a day-trader or are you more long-term? Should you trade in bonds or stocks or futures? Not everyone thrives under every situation where there is financial risk.

For me, I didn’t like trading futures as much as I liked investing more long term in stocks. That’s why I stopped trading and started buying tech stocks and holding them. It suited me better. Taking larger intraday positions was too terrifying for me. So I switched to buying positions into companies that I believe in. I found that I could do that more effectively and could take larger positions there with less fear.

Find what best fits you, and you’ll see that sizing up may be more natural than you realized.

But whatever you do, you need to know that you can lose money. You probably will. No one always wins. Not. Even. Buffett. Yes, Warren Buffett loses; check out his losses on the airlines.

Reap the rewards

Look, there are no rewards without risk.

Not everyone should be taking huge risks. Some people can make millions in a day. Many won’t.

To get greater rewards, you need to know yourself better.

The most important thing is that you are growing in your risk-taking and learning to become a better investor.

If you do that, you can’t help but win.

And you’ll be rewarded.

Disclosure: None of this is investment advice or the like. It’s just one investor sharing his learnings and stories. Consult a professional advisor if you want help in investing.

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One of the greatest secrets to making money in the stock market

The hardest thing about investing in stocks is letting go of your money. Let me explain.

When you invest your money into the market, you can’t control how the stock price will behave, and often it will go down. And the temptation is to sell when it does that. And that will mean you will “realize” your loss, which means the money you were losing before you sold your stock, called a “paper loss,” will become a real one if you sell your stock when it goes down from the price you bought it. So you will walk away with less money than you started with. No one wants that.

But it has happened to everyone; I’ve done it; even the pros have, too. But that needn’t happen to you. And it’s all about your approach.

If you approached buying stocks differently, you’d avoid realizing your losses and will even make gains. You can even get rich. And that means you need to understand that once you invest your money into a stock, you need to cease thinking about it as money to succeed.

You see, investing in stocks is about thinking less about your money and focusing more on your investments. Because to make more money in the stock market you can’t think about money. That will just make you lose it faster.

When you focus on your money when it’s invested in the market, especially in tech stocks, there’s volatility. A lot of it…boat loads of it. Those are the ups and downs a stock price will go through on any given day. You know, the ones that scare the crap out of you, that make you jump ship and sell before you ever intended to, the ones that make you feel like you’re going to lose all of your money if you keep holding on to that stock. Yeah, those.

Holding on when you get into a stock is especially hard when you first buy a stock and then it goes down, like, immediately after you buy-in. It feels awful. I know. I’ve been there—many times.

I bought Nvidia over a year ago, and it dropped by 50% or more over a month or two. So, at that point, I was thousands of dollars down. And believe me, I wanted to sell and realize my paper loses. It felt like everything inside of me was burning down. But I held on. I didn’t sell.

Instead, I waited.

If you buy a good or great company’s stock and it goes down, they will often go back up and continue to grow. That’s what great companies, especially the ones that are market leaders, which Nvidia was and is, do. Waiting and holding your stock position will help you avoid a loss even when you’re thousands of dollars down. And more importantly, eventually, you’ll gain.

To do that, you have to let go of your money. You need to stop thinking about your money as it is. Yes, it’s hard to see the ten thousand dollars you initially invested become five thousand when a stock price drops. And, yes, it does feel like someone just reached into your pocket and robbed you in broad daylight, while smiling at you. But, if you can short-circuit your brain and stop thinking about your money as money, you’ll begin to see something else. Something better.

You’ll start envisioning yourself as an owner. Because, really, that’s what buying a stock means. You own a small piece of a company. When I bought Nvidia’s stock, I owned a small piece of the world’s best chip designer. And sure, the stock fell out of favor right after I bought it. But when I wasn’t focusing on my money, and the imaginary guy’s hand in my pocket, I was able to focus on my investment. And I remembered why I bought it in the first place, which made it easier to hold on to the stock and wait. And I could see that the company was going to be ok and was able to remember that it was the market leader and the best at creating AI chips and would continue to innovate. Doing that helped me stop thinking about my 50% drop and realize I owned a piece of a world-class company.

After several months, Nvidia fully recovered to the original price I bought it at. Then it continued to go up, as did my net worth. I did sell it, unfortunately. That’s because it dipped during the covid scare earlier this year, which is when I sold it, to my chagrin. It was for a gain, but for far less than I would have if I held on. If I would have held on, instead of making a little bit of money, I could have more than doubled my money.

That’s the thing about making money in the market. When you think less about your money, the more of it you often make.

Now, I’m not saying that every stock will recover or will be a winner. And, I’m not saying that everyone can get rich investing. I am saying that you need to do your homework and need to invest in the best companies you can find. And if you do, and hold on, your chances of growing your wealth is much greater, than if you don’t.

You see, you don’t become rich by thinking about money. No. You do it by thinking like an owner.

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Berkshire Investing in Snowflake Is Revolutionary

Berkshire Hathaway’s investment and Snowflake (symbol SNOW) is a wake-up call to all investors, for both value and growth.

The stake it took was a whopping $730 million. And yes, it made a 100% gain in the first day of trading, making their investment worth $1.6 billion before Warren Buffett, the CEO of Berkshire, even cracked open his second Coke Classic of the day. And it’s easy to get all wrapped up in that, the gain, not the Coke, and think, “Golly, that Buffett is amazing and rich and amazingly rich.”

But that would mean we just see the glitz and glitter; we’re missing the big picture because there was a seismic shift that happened when Berkshire invested in Snowflake.

The Real Meaning Behind Investing in Snowflake

They shifted to growth investing. I’m not saying that Berkshire believes that value investing is dead or that they won’t be looking for those types of opportunities ever again. But they are legitimizing growth investing. If you look beyond the noise of Snowflake’s doubling and this and that return, you can see the signal that Berkshire is sending is revolutionary. Remember, to learn from any investor, don’t listen to what they say but what they do. And what Berkshire did was invest in an IPO that was already expensive and carries all of the uncertainties of a tech IPO, yet, they still invested. Yeah, it’s big.

Sure, Berkshire isn’t unfamiliar with investing in tech. Two of their largest holdings are in Apple and Amazon, longtime darlings of the market. And as much as Apple could be considered a value play, Amazon certainly was not and still isn’t. It has always been expensive. But investing in Snowflake is another step toward a different investing framework that is evolving in Berkshire. And here are some of my thoughts about it.

It’s validating an investing strategy that has long been perceived as being at odds with value investing. I don’t think Buffett thought that. But it was clear in his previous investments in consumer goods and airlines, etc. he was investing like a classic value investor. And as the world changed and their performance shrunk and dwindled while the technology sector seemed to be swallowing the universe with tremendous growth year after year, it doesn’t take a genius to see that the world has changed. Now we see the greatest value investor act in a way that is contrary to that investment philosophy.

Now we shouldn’t just pay attention to the macro steps but also the micro ones. By doing that, we can learn from why they invested in Snowflake and made this change.

What We Learn From Berkshire Investing in Snowflake

They weren’t spraying and praying. No, Berkshire knew the power of Snowflake. They were informed and intentional. As an earlier customer of Snowflake, Geico used it to store and analyze their data. They knew Snowflake’s monetization model since they likely pay them a lot of money. And they probably did it happily since they found their services invaluable. That insight and experience caused Geico’s CEO to lead one of the earlier rounds of investing in Snowflake, pre-IPO. And all of that information was almost certainly shared with Berkshire and Buffett. So they had deep, intimate knowledge of what Snowflake does and what it could do in the future.

Berkshire focused on winners. Geico started using Snowflake, presumably because their service and platform was better than other providers. They saw the edge. Snowflake had set themselves apart from their competitors in their offering of better technology and services. Berkshire had an early look into Snowflake at scale, since Geico is a large company with massive data. And if Snowflake helped Geico make more informed and insightful decisions through Snowflake’s product, that’s an incredible advantage as an investor. They saw how powerful the product is and how much it can bring to any industry, company, customer. And it looks like Berkshire believes Snowflake can be a dominant force in their market.

I had a similar experience at a much smaller scale. My company used Shopify and Twilio to build software solutions for our clients. And my business partner kept on talking about how great these platforms were. And once I realized that they were publicly traded companies, I invested. And they, especially Shopify, have performed incredibly well for me. That’s what experiential information with first-hand experiences as a customer, like Geico had, can do. It gives a powerful insight into a company. It helps you see how valuable it really is.

The reason that Snowflake is different from Amazon and Apple is that the latter two already dominate their respective industries. Who’s better and bigger than they? No one. The likelihood they will get knocked off their lead is very unlikely, especially in the near future. So they are relatively safe investments. It’s a more of a value play. But Snowflake isn’t that dominant. They are not the biggest player in their industry. So there is inherent uncertainty. Yet, Berkshire still invested.

Why This Matters to All Investors

Why does this matter to us, smaller investors? It should make us re-think. If you are a value investor, it should make you reconsider your investment strategy. When one of the greatest value investors starts to use a growth methodology in force, all value investors should reconsider their core investing tenants. And it’s true; we don’t know if he was the one that decided to invest in Snowflake. It could have been one of his heirs to the Berkshire throne.

And I don’t know if Buffett or Berkshire is moving away from value investing. But the company is certainly moving toward growth investing. And that should make every investor wonder why.

And one clear reason is that those who have invested with a growth strategy have performed incredibly well. Not all, of course. But many. Anyone who invested in Amazon, Netflix, and Google early vastly outperformed the market. It seems that Berkshire doesn’t want to lose out on future companies like those. For instance, they had the chance to invest in Google when it IPO’d but turn it down because they thought it was too expensive at $24 billion. Now Google makes that in yearly revenue. And Berkshire doesn’t want to make that mistake again.

Also, for growth investors, this shift is good news. It means there will be more capital, more eyeballs, more people rushing to get into growth companies. That will buoy the entire stock market, especially for technology-based, high growth companies with an edge, playing in a large market, like Snowflake. That means prices for these stocks will likely go up faster and higher with greater multiples than before. We already see that. Snowflake is a perfect example, by rising 100% on day one of trading. And it’s continuing to rise, and there’s no telling when it’s going to stop. It probably won’t for a very long time.

Of course, not every technology stock wins. Not every platform grows and dominates. There are losers. Look at Quibi. So every investor must be careful, shrewd, diligent. We’ve all got to do our homework. And really, I don’t know if every company will have crazy high multiples and that investors will always tolerate super expensive investments. But for the foreseeable future, they will. They already are, even Berkshire.

And this, I believe, is only the beginning.

For a giant has awoken.

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