Don’t Let Sunken Costs Drown Your Portfolio
Rain Industries, once a shining star with a meteoric rise, now casts a shadow of disappointment for many investors. Stuck at ₹200, far from its 2017 peak of ₹450, it begs the question: will it finally rain again, or is it time to move on?
The Anchor of Past Glory: Many investors remain anchored to the hope of regaining their ₹450 purchase price. But clinging to this “sunken cost” can be disastrous. The stock already priced in much future potential in 2017, leaving years of disappointment in its wake.
Opportunity Cost: The Painful Truth: Holding onto Rain Industries for six years has meant missing out on potential triples in other stocks. This inaction has inflicted significant damage on portfolios, highlighting the opportunity cost of emotional attachment.
Price Signals, Not Wishes: The price is God, not blind faith. If the price dropped from ₹460 to ₹40, it was a signal to re-evaluate. Unless you have nerves of steel to withstand a 90% drawdown, consider letting go.
HEG: Another Cautionary Tale: HEG’s 21x surge in a year and a half likely priced in its future earnings, just like WIPRO in 2001. Waiting for such stocks to reclaim past glory can be an eternity.
Drink the Medicine, Move On: Don’t prolong the pain. Cut your losses, review the market, and invest in stocks showing upward momentum. Anchoring bias, fueled by excessive research justifying your investment, is a common pitfall. Break free and save your portfolio.
Remember: The market offers countless opportunities. Don’t let emotional attachment to a single stock drown your wealth. Make informed decisions, let go of past mistakes, and embrace new possibilities for growth.
WeekendInvesting Strategy Spotlight !
Rolling CAGR denotes how the CAGR progresses over a period of time. 3 year rolling CAGR denotes the CAGR corresponding to the latest 3 years at any given point in time.
Below is a chart comparing the 3 year rolling CAGR of Mi MT Allcap versus the same on its benchmark, the CNX 500 index. As on 20 Feb 2024, the 3 year CAGR on Mi MT Allcap stands at 42.4% while the same on CNX 500 sums up to 17% (an outstanding beat)
Right since going live back in 2018, Mi MT Allcap’s 3 year CAGR has hovered in the range of 35% to 55% whereas the same on CNX 500 has oscillated between 10% to 30% thus maintaining an extremely healthy lead with solid performance.
Kindly write to us on support@weekendinvesting.com if you have any queries
