How ya'll coping with portfolio drawdowns?

[Paarslaars]

3 hours ago, coffeecaninvestor said:

How concentrated were you?

 

In one stock about 35%.

The problem was I owned similar companies, bringing the total exposure to one particular industry to 60%.

 

In the future I don't want to be exposed to one particular industry more than 25%. Not because I don't think you can do that when your conviction is high, but simply because I have gotten to know myself more as an investor and I personally feel like I don't handle big drawdowns like that well emotionally (I felt like shit, even though rationally I know everything is OK).

 

Edited April 28 by Paarslaars

[Spooky]

26 minutes ago, Gregmal said:

Nintendo? Certainly. 

 

Thanks. Too many ideas, too little free capital these days 

Edited April 28 by Spooky

[shhughes1116]

12 hours ago, Seoshin said:

As the title suggests, share some tips on how to deal with double digit drawdowns. Also, in not succumbing to FOMO when everyone's posting good ytd returns because of semis. Although this isn't my first rodeo (rode the rollercoaster of 2022) I can't help this time to feel a bit bitter as I saw the writing in the wall with semis last year and did not act on it. I felt not confident and asked myself, this isn't that easy. And yet, a lot of names ran up not only last year but also this year. Anyway, might be ranting a lot right now. Thanks in advance!

The GFC was the last time I had a double-digit drawdown across my investable assets.  Maybe that means I don’t take enough risk.  However, there are certainly specific securities that I’ve had a double-digit drawdown in.  In most instances, I broke my own investing rules by getting into those securities, so I take my lumps, sell, and move on.  I try to consider it tuition paid, and better to pay it now while I’m still working.
 

 I got wrecked recently - 50% loss in the security and about 1% of NAV - in Emerita Resources.  While they have some nice polymetallic deposits in Iberian belt, I broke my rule by investing with questionable management, and also broke my rule by wagering on a court verdict for Aznacollar.    
 

Stop worrying about other peoples’ returns.  Stop worrying about stocks that ran away from you.  Envy is the thief of happiness.  Manage your money to meet your goals and your risk tolerance. If drawdowns are making you uncomfortable, it’s ok to dial back the risk.  

 

 

[frommi]

2 minutes ago, shhughes1116 said:

The GFC was the last time I had a double-digit drawdown across my investable assets.  

Never more than -10%? How do you do that? Only invest 20% of your money?

[Milu]

58 minutes ago, frommi said:

Never more than -10%? How do you do that? Only invest 20% of your money?

Ya I was wondering how that was possible, must have a very conservative asset allocation. My largest drawdown was about 35% and I mostly took it well. I’ve always tried to mentally prepare myself for a 50% drawdown and I expect I’ll get one at some stage, possible more than once over a lifetime. 

[shhughes1116]

49 minutes ago, frommi said:

Never more than -10%? How do you do that? Only invest 20% of your money?

1. I hold a lot of cash.  
2. I combine deep value with some technical analysis.  My personality traits make it really hard for me to do momentum and growth investing.  
3. My job prevents me from investing in large parts of the market, so i spend a lot of time deeply following the parts of the market I am allowed to invest in.  
4. I missed the COVID drawdown entirely.  
5.  Luck. 
 

I’m sure #5 does most of the heavy lifting.  I think my job-imposed investment limitations have also been a blessing in disguise.  It keeps me out of a lot of stuff that I don’t know well and probably not capable of understanding.

 

Im sure you guys have better returns than me most years.  I’m fine sacrificing some returns in order to sleep well, not have anxiety, etc.  My aim is to survive the marathon, not win it.  

[Milu]

1 minute ago, shhughes1116 said:

1. I hold a lot of cash.  
2. I combine deep value with some technical analysis.  My personality traits make it really hard for me to do momentum and growth investing.  
3. My job prevents me from investing in large parts of the market, so i spend a lot of time deeply following the parts of the market I am allowed to invest in.  
4. I missed the COVID drawdown entirely.  
5.  Luck. 
 

I’m sure #5 does most of the heavy lifting.  I think my job-imposed investment limitations have also been a blessing in disguise.  It keeps me out of a lot of stuff that I don’t know well and probably not capable of understanding.

 

Im sure you guys have better returns than me most years.  I’m fine sacrificing some returns in order to sleep well, not have anxiety, etc.  My aim is to survive the marathon, not win it.  

Makes sense, you got to find the approach that maps to your personality. Large drawdowns in my investment portfolio doesn’t give me any anxiety or affect my sleep. Some random health issue or family problem on the other hand could give me the odd sleepless night. 

[Eldad]

Have you ever heard the Buffett rule where he puts in an order and then if he doesn’t get it that day, he has to lower it the next day and so on and so forth? 
 

That is pretty genius when it comes to buying right and managing your head. Don’t reach for expensive stuff and if the stuff you really really want gets in the buy zone, ease into it because it’s probably going lower. 

 

With no brokerage fees anymore you can buy 1 share every 25 cents down if you want. Something like that works a lot better in a protracted drawdown for me than shooting my wad the first time it looks buyable. 

[cwericb]

Jeez, and here I thought I was the only one on a losing streak.

 

Being over 50% in Fairfax has been a bummer lately, but I have been bouncing between +3% and -7% so far this year (negative about 90% of the time). But when I'm in the negative, I keep saying to myself, "Oh well, less capital gains tax I will have to pay on my previous earnings."

Doesn't help much though.

[KCLarkin]

16 hours ago, Seoshin said:

As the title suggests, share some tips on how to deal with double digit drawdowns. Also, in not succumbing to FOMO when everyone's posting good ytd returns because of semis. Although this isn't my first rodeo (rode the rollercoaster of 2022) I can't help this time to feel a bit bitter as I saw the writing in the wall with semis last year and did not act on it. I felt not confident and asked myself, this isn't that easy. And yet, a lot of names ran up not only last year but also this year. Anyway, might be ranting a lot right now. Thanks in advance!

 

Unfortunately, any advice is highly sensitive to your personality and portfolio. You need to match your portfolio to your personality.

 

Personally, I've always been (relatively) immune to FOMO. Watching others get wrecked during dotcom (and other bubbles) makes me almost allergic to chasing "hot stocks". And my returns have probably suffered at times by avoiding great companies just because they were "hot stocks".

 

I also get excited during drawdowns, because that's where the best opportunities are. 

 

--

But a few specific tricks I use:

1. When the pain gets too much, I might sell a TINY part of one of my positions. This is a psychological trick. I KNOW that I should be buying. But the act of "doing something" is usually enough to satisfy the panic. Then I can either ride out the drawdown or start buying with a clear mind.

2. I always assume there will be a 50% drawdown in my portfolio (or a specific stock). This is just the cost of buying stocks. It's like a new car. The day I drive the stock off the lot, I assume 50% in depreciation. But it is worth it, given the higher returns from stocks.

3.  I like Buffett's idea of "equity bonds". An easy trick is to look at the earnings yield instead of P/E. A 50% drawdown just means your yield doubled.

4. Write an annual investor letter (to yourself). This is the time to reflect on position sizing, etc. Not in the middle of a drawdown.

5. Go "window shopping" for bargains even if you don't have cash. For example, want CSU to $2000 so I can buy more. (never mind that my 20% position in a 50% drawdown).

6. I try to only buy stocks that I would feel comfortable making 100% of my portfolio. And I prefer to invest alongside founders who actually do have ~100% of their portfolio in the stock.

 

[brobro777]

I remember those years of 2007-2009 when people got their asses kicked in a major way (SPX 666 in March 2009) - not just a little bit like 10-20% cracks but 50% baseball bat hits to their faces. I luckily didn't have to experience it because I was short the markets from 2006 to June 2009 but one guy I knew who came out okay just did the basic things: 

 

he went to work, his invested money was something that he didn't need for a long time so he just held, looking at the long term, and he kept living life, like buying a house in Bergen county NJ in December 2009 because he needed more room for his sons

now getting divorced years later, well that's....

 

 

[Lazarus]

8 hours ago, shhughes1116 said:

1. I hold a lot of cash.  
2. I combine deep value with some technical analysis.  My personality traits make it really hard for me to do momentum and growth investing.  
3. My job prevents me from investing in large parts of the market, so i spend a lot of time deeply following the parts of the market I am allowed to invest in.  
4. I missed the COVID drawdown entirely.  
5.  Luck. 

 

I don't mean to lecture you, but you're leaving a lot of money on the table by holding that much cash. Why not just go 100% in an index fund and forget about it?

[DooDiligence]

Cash is king. You could argue that it's not a drag on returns since it keeps you from being a forced seller. Apparently I'm not the only one who thinks this way.

[Seoshin]

10 hours ago, Paarslaars said:

 

(I felt like shit, even though rationally I know everything is OK).

 

exactly this. Rationally shitty feeling to be exact.

[Seoshin]

9 hours ago, shhughes1116 said:

The GFC was the last time I had a double-digit drawdown across my investable assets.  Maybe that means I don’t take enough risk.  However, there are certainly specific securities that I’ve had a double-digit drawdown in.  In most instances, I broke my own investing rules by getting into those securities, so I take my lumps, sell, and move on.  I try to consider it tuition paid, and better to pay it now while I’m still working.
 

 I got wrecked recently - 50% loss in the security and about 1% of NAV - in Emerita Resources.  While they have some nice polymetallic deposits in Iberian belt, I broke my rule by investing with questionable management, and also broke my rule by wagering on a court verdict for Aznacollar.    
 

Stop worrying about other peoples’ returns.  Stop worrying about stocks that ran away from you.  Envy is the thief of happiness.  Manage your money to meet your goals and your risk tolerance. If drawdowns are making you uncomfortable, it’s ok to dial back the risk.  

 

 

Thank you

[frommi]

15 hours ago, shhughes1116 said:

1. I hold a lot of cash.  
2. I combine deep value with some technical analysis.  My personality traits make it really hard for me to do momentum and growth investing.  
3. My job prevents me from investing in large parts of the market, so i spend a lot of time deeply following the parts of the market I am allowed to invest in.  
4. I missed the COVID drawdown entirely.  
5.  Luck. 
 

I’m sure #5 does most of the heavy lifting.  I think my job-imposed investment limitations have also been a blessing in disguise.  It keeps me out of a lot of stuff that I don’t know well and probably not capable of understanding.

 

Im sure you guys have better returns than me most years.  I’m fine sacrificing some returns in order to sleep well, not have anxiety, etc.  My aim is to survive the marathon, not win it.  

I really want to understand how its possible, what do you mean with a lot of cash, 80%? In the 2025 return threat you mentioned you did 188% in 2025. You run circles around me and i want to learn how that works. Your 2025 return alone is more than i did over 5 years.
Or dou you measure the -10% from the start of the year or some other arbitrary point in time?

[nsx5200]

I have a HELOC with a 10 year draw down period that I can make last for 10+ years if it comes down to it.  On top of that, there are life-long equity positions that can be margined or sold off for cash.  These are essentially multiple levels of backup plans in case something goes to poo.  As long as it's not full systemic (ex. nuclear winter, end of civilization in which case I would be considering shotguns instead of numbers on a screen), it just means more buying opportunities.

 

For those with an established equity position in life, it's a great time to take advantage of these opportunities.  For those that are still establishing the equities, the same formula still applies: Work hard, live below your means, keep a year worth of cushion in your backup plan (cash, HELOC, whatever that incurs the least amount of (opportunity) cost), and over time, the accumulated equities will snowball into its own established positions.  You can pretty much tell who's been around a long time by the attitude they express on this thread.  Take the long-view like the old-timers, it's less stressful, and it actually works.  Once you reach your own FU number, anything above that is "just money".  Nobody can take it with them at the end, so what's really the difference between +50% or -50% at the end?  Does it really matter to you, personally, if the next guy turned into a millionaire buying BTC?  It helps to know what's actually important in life and not get stressed about the stuff that aren't.

 

On a lighter note, I find it amusing that one of my neighbor will go out of their way to harass me about my lawn.  Talking about worrying about the not-important stuff in life...  Try not to be my neighbor.  It's a lot harder than it sounds.

[thepupil]

40 minutes ago, nsx5200 said:

Nobody can take it with them at the end, so what's really the difference between +50% or -50% at the end?  Does it really matter to you, personally, if the next guy turned into a millionaire buying BTC?  It helps to know what's actually important in life and not get stressed about the stuff that aren't.

it's sentences like this that make me think people have a lot more money than i do. this is true in many cases on this forum of course, but statistically is not true for gen pop. 

 

like the whole "invest money you don't need" thing.  like if i didn't need the money today or tomorrow, i'd give it away. i may be net saver and not need the money to live, but i don't want to work forever so i absolutely need the money later, and the next generations "need" the money, so permanently impairing* significant capital is bad. 

 

this says i'm doing fine https://dqydj.com/net-worth-by-age-calculator/ , but to have the "i'm investing with house money/i've endowed all my expenditures/and can not care about drawdowns/a big loser....shit, i'd have to have $20 million... 

 

*permanent impairment is obviously different than drawdown, but in real time, you never know if the two are different. you can do all the work possible to ensure things are temporary, but do you know?

Edited April 29 by thepupil

[73 Reds]

15 minutes ago, thepupil said:

it's sentences like this that make me think people have a lot more money than i do. this is true in many cases on this forum of course, but statistically is not true for gen pop. 

 

like the whole "invest money you don't need" thing.  like if i didn't need the money today or tomorrow, i'd give it away. i may be net saver and not need the money to live, but i don't want to work forever so i absolutely need the money later, and the next generations "need" the money, so permanently impairing* significant capital is bad. 

 

this says i'm doing fine https://dqydj.com/net-worth-by-age-calculator/ , but to have the "i'm investing with house money/i've endowed all my expenditures/and can not care about drawdowns/a big loser....shit, i'd have to have $20 million... 

 

*permanent impairment is obviously different than drawdown, but in real time, you never know if the two are different. you can do all the work possible to ensure things are temporary, but do you know?

Hopefully more people than not on this forum reach the point where they have more money than they really need.  After all, isn't that the point of investing?  After that, it is more a question of what you want to do with your money rather than what you need to do.   As I said before, discipline and personal responsibility while building wealth are as important, if not more important than how you build your wealth.  And as this forum demonstrates, there are a lot of ways to build wealth.  

[nsx5200]

4 minutes ago, thepupil said:

this says i'm doing fine https://dqydj.com/net-worth-by-age-calculator/ , but to have the "i'm investing with house money/i've endowed all my expenditures/and can not care about drawdowns/a big loser....shit, i'd have to have $20 million... 

$20 mil is quite a bit.

 

Once the FU money is secured in pretty much all but the world-ending scenarios, I would claim that it's easier for you to work on the "living below your means", with the addition of "being okay with it".  If you're on social media a lot, having less than $20mil will feel insufficient, as you will feel like you need to own several Ferraris just to be "happy".  That million dollar house will feel insufficient as you eye that $5M house.  Even if you reach $20M, you still won't think it's enough, as the goal post have moved.  It only looks enough because it seems like an impossible goal right now.  Determining your actual FU money and not growing your lifestyle creep is crucial, as it sets the bare minimum that you need for the remainder of your life.  I suspect the real FU money people really need in life is a lot lower than people think(ex. $20M).  Figure out what's important in life, and optimize that.  Money is just a tool to accomplishes that, and shouldn't be what's important in life... Just look at the Murdochs and the Redstones.  Definitely got their priorities wrong.  Plenty of anti-examples around us to learn from.

[thepupil]

8 minutes ago, nsx5200 said:

$20 mil is quite a bit.

 

Once the FU money is secured in pretty much all but the world-ending scenarios, I would claim that it's easier for you to work on the "living below your means", with the addition of "being okay with it".  If you're on social media a lot, having less than $20mil will feel insufficient, as you will feel like you need to own several Ferraris just to be "happy".  That million dollar house will feel insufficient as you eye that $5M house.  Even if you reach $20M, you still won't think it's enough, as the goal post have moved.  It only looks enough because it seems like an impossible goal right now.  Determining your actual FU money and not growing your lifestyle creep is crucial, as it sets the bare minimum that you need for the remainder of your life.  I suspect the real FU money people really need in life is a lot lower than people think(ex. $20M).  Figure out what's important in life, and optimize that.  Money is just a tool to accomplishes that, and shouldn't be what's important in life... Just look at the Murdochs and the Redstones.  Definitely got their priorities wrong.  Plenty of anti-examples around us to learn from.

 

to be clear, i don't think i "need" $20mm. to be completely immune to a 50% drawdown though and be investing with "money i don't need"...i might. 

 

 

 

[73 Reds]

7 minutes ago, nsx5200 said:

$20 mil is quite a bit.

 

Once the FU money is secured in pretty much all but the world-ending scenarios, I would claim that it's easier for you to work on the "living below your means", with the addition of "being okay with it".  If you're on social media a lot, having less than $20mil will feel insufficient, as you will feel like you need to own several Ferraris just to be "happy".  That million dollar house will feel insufficient as you eye that $5M house.  Even if you reach $20M, you still won't think it's enough, as the goal post have moved.  It only looks enough because it seems like an impossible goal right now.  Determining your actual FU money and not growing your lifestyle creep is crucial, as it sets the bare minimum that you need for the remainder of your life.  I suspect the real FU money people really need in life is a lot lower than people think(ex. $20M).  Figure out what's important in life, and optimize that.  Money is just a tool to accomplishes that, and shouldn't be what's important in life... Just look at the Murdochs and the Redstones.  Definitely got their priorities wrong.  Plenty of anti-examples around us to learn from.

Yep.  Most wealthy people don't want to own sports franchises and advertise their wealth to the world.   In fact, most are exactly opposite, preferring to enjoy life in relative autonomy.  For those who start young and build wealth consistently with proper habits, drawdowns should be nothing more than a temporary inconvenience.  Just be confident in what you own, and why.

[SharperDingaan]

Money is the servant, not the master.  

Of course; when you don't have it, it doesn't feel that way at all.

 

Everyone will have different priorities for their first wealth dollars; most of it a function of debt level, stage of life, etc. All goes well, over time the potholes get filled, and you end up with a stash to fund 'retirement' .... however that looks. After that, wealth starts getting toxic, particularly if your circumstances are also very different from many of those around you. 

 

Safely spending the stash is actually one of the harder things to do. No drugs, flashy cars, fast women, excessive booze, multiple houses, etc. ... removes a lot of the available avenues. There is also only so much travel one can do before it gets boring, and 'helping the kids' before it starts creating dependencies. You need hobbies.

 

Evolution.

 

SD

 

  

Edited April 29 by SharperDingaan

[shhughes1116]

10 hours ago, Lazarus said:

 

I don't mean to lecture you, but you're leaving a lot of money on the table by holding that much cash. Why not just go 100% in an index fund and forget about it?

All of your returns are likely better than mine over time.  I’m ok with that.  Clearly I’m leaving some returns on the table.  
 

If I am fully invested, whether that is in stocks or ETFs, it is very hard for me to be mentally present with my family.    When I die, my kids and wife aren’t gonna remember how much money I had, or the returns I had in 2021 or 2017 or any other specific year.  They will remember whether or not I was present with them.  And it is easier for me to be mentally present when I am in mostly cash and cash equivalents.  
 

we are all creatures of our past.  In my past, I watched a lot of people get really mentally f**cked up by the gfc.  I saw a lot of people, that should have retired to spend time with their spouse and kids,  continue working until they died because they lost a bunch of money.  I don’t need that in my life.  

[shhughes1116]

3 hours ago, frommi said:

I really want to understand how its possible, what do you mean with a lot of cash, 80%? In the 2025 return threat you mentioned you did 188% in 2025. You run circles around me and i want to learn how that works. Your 2025 return alone is more than i did over 5 years.
Or dou you measure the -10% from the start of the year or some other arbitrary point in time?

I attribute my 2025 return to luck.  It will never happen again.   
 

Mining is one of the few areas in the market that I am allowed to invest in.  In 2025, I batted nearly 100% on junior miners.  Take a look at my Canadian Copper thread - that is one example and one reason for my 2025 return.