My biggest stock market regrets have come from selling too early…
Whether it was dumping Microsoft and Oracle in the early 1990s or getting out of Apple far too early in the 2000s, I’ve literally left tens of millions of dollars on the table from selling too early.
I got into Oracle and Microsoft in 1990 and recommended Apple in 2003. Had I kept just $100,000 in each, I’d have an extra $122 million today.
That’s the cost of selling too early. Even just $5,000 in each stock would be worth $6.1 million today.
Why didn’t I stick around? In one word: volatility.
In the early days of a high-growth stock, there are always doubts about whether the company will make it. Sometimes, those doubts get magnified by the market going into huge bouts of volatility.
For instance, Oracle once dropped over 80% as doubts rose about its survival during an accounting scandal. Microsoft would frequently see its stock swing down 30% or more.
And Apple was always being questioned by the market about its corporate direction as it transformed into the powerhouse it is today.
It bears repeating that the problem with stocks poised for massive growth is that their early days are highly volatile.
If you don’t understand that volatility is the admission price you pay to be able to turn a few modest $5,000 investments into as much as $6.1 million, then you will always be doomed to sell early.
So how do you stay in a position in the face of gut-wrenching volatility?
I had to learn this lesson myself… and I am happy to share what I have learned with you today.
Focus on the Long-Term Narrative
The first step is to always position-size wisely. Pick a dollar amount you are comfortable losing. That’s easy, right?
For some, it’s $400, or maybe $1,000. Or maybe losing $5,000 is a non-event for them. Pick the number that is right for you.
The second step is to get 100% clarity on the circumstances you expect will drive the stock higher.
For example, the long-term driving circumstance for Microsoft was the adoption of the desktop computer. That’s because Microsoft had a monopoly on desktop computer operating systems.
When I bought Microsoft in 1990, only 15% of homes had a computer. Today, 89% have one.
To make money on Microsoft, all you had to know was that they had a monopoly on desktop operating systems… and that desktop computers would soon be in every home.
Wall Street calls these circumstances “narratives.” While working on Wall Street, I discovered narratives drive much of a stock’s price action…. both up and down.
When Wall Street grew fearful of home computer adoption rates slowing, guess what… Microsoft’s stock would drop.
The opposite would happen when Wall Street became convinced that everyone would eventually own a home computer. The stock price would streak higher. All high-growth assets have short-term, interim-term, and long-term narratives at play.
We get in trouble when we focus on negative short-term and interim-term narratives instead of the bigger, positive long-term narrative.
In the case of Microsoft, the short-term negative narrative was: Why would people want a “business machine” in their house? The interim-term negative narrative was that IBM would displace Microsoft with its own operating system.
From time to time, these short- and interim-term narratives would get magnified by the market, and Microsoft’s stock would get bullied lower.
But in hindsight, if you just knew what the outcome of the long-term narrative was (that just about everyone would own a Microsoft-enabled personal computer), then all of Microsoft’s volatility was just a buying opportunity.
To figure that out, all you had to do was track the sales of Microsoft operating systems. They were through the roof, dwarfing the sales of their competitors. Every earnings quarter, the sales data was telling you that Microsoft would be the winner.
Why I’m Happy About This Recent Crypto Sell-Off
Bitcoin and Microsoft could not be more different. But what does unite them is the long-term narrative of global adoption.
Over the last five years, it’s been bitcoin’s long-term adoption narrative that has kept me in it since I first recommended it in 2016 at $428. When I first understood the power of bitcoin, I realized that eventually, billions of people would own it.
It didn’t take a rocket scientist to realize that with a limited supply of only 21 million coins, it wouldn’t take much global adoption to increase the value of bitcoin significantly.
Back in 2016, about 500,000 people owned bitcoin. Today, that number is over 200 million.
According to research from Crypto.com, bitcoin is expected to reach one billion users by 2025. By 2030 that number is expected to swell to 3.7 billion.
Just like Microsoft’s massive user-growth days of the 1980s and ’90s, all you need to know to make money in bitcoin is that usage will continue to explode higher.
So, when I see bitcoin sell-off… I just remember when the price of Microsoft would get whacked, and “experts” would opine on “the end” of the desktop PC revolution.
It’s the same narrative, just a different investment vehicle.
According to research from Cathie Wood from ARK Invest, bitcoin’s level of future usage will correlate to $500,000 bitcoin by 2025. And I completely agree with her. We will see $500,000 bitcoin by 2025.
Long story short: This pullback is simply another buying opportunity.
The key to surviving these pullbacks is to think in five-year time frames.
If you need the money before five years, don’t put it in bitcoin. But if it’s money you don’t need right now, then invest it in bitcoin when it’s getting beaten down.
In my opinion, there’s no other asset in the world that will make you more money over the next five years than bitcoin.
If Cathie Wood is correct (and I believe she is)… and bitcoin hits $500,000 by 2025… you’ll see an average annual compound growth rate of 106% per year between now and then.
Is there any other asset in your portfolio capable of that type of growth?
I seriously doubt it.
I remind myself of this all the time. Especially if I’ve just paid $65,000 for bitcoin, which I did recently… And then it drops into the $50,000s.
I say the same thing I said back in 2018 when I bought more bitcoin at $16,000 and watched it drop to $3,800…
“When you look at the chart five years from now, and it’s at $500,000… You won’t even see the little blip between $65,000 and $57,000 (or from $16,000 to $3,800). It just won’t even register on the chart, so don’t sweat it.”
The Mindset You Need to Invest in Crypto
Friends, what I’ve learned over the years is that when you’ve identified a life-changing idea… you need to think in five-year timeframes.
In the ’90s, I thought in timeframes that were too short for my investment thesis to play out. And that had me selling positions way too early… Or selling out of positions during market crashes, which is a huge mistake.
So I want to congratulate you if you had the courage to withstand bitcoin’s volatility since I recommended it in 2016 at $428.
Even with the most recent pullback, if you simply held on to your initial $500 or $1,000 stake, it’d be worth $66,588 and $133,178, respectively, today.
If you want to take a small amount of money and radically grow it into a multimillion-dollar fortune – which my subscribers and I have done in crypto – then you must pay the price by dealing with the short-term and interim-term negative price action.
There will be more volatility. I don’t know how much more. But again, it doesn’t matter. Just don’t draw long-term negative conclusions about crypto based on what happens over the short term.
Always remember that widespread adoption is the overriding driver that will turn crypto into a multitrillion-dollar asset class. That’s the “mindset” you need to keep.
If you can stay true to that narrative, you’ll look back in the years ahead from a position of comfort and wealth instead of regret and recriminations.
Let the Game Come to You!
Editor, Palm Beach Daily
P.S. As I mentioned above, I agree with Cathie Wood that bitcoin will hit $500,000 in the coming years. But the opportunity to buy new bitcoin won’t last too much longer.
That’s because we’re about to see the incoming supply of new bitcoin drop by as much as 98.2%.
It’s all due to an event I call the “Final Halving.”
It’s not pre-programmed to happen like the other halvings… It’s much bigger.
The whole world believes bitcoin’s final halving won’t take place until 2140. They are wrong.
Based on my research, the real Final Halving is coming in 2022, not 2140. And it’ll make all the previously scheduled halvings obsolete.
Here’s why I say that…
A group of bitcoin insiders has done something that was supposed to be impossible.
They’ve discovered a “backdoor” way to reduce the amount of new bitcoin coming to market all the way down to near zero… in 2022.
They’re going to pull forward more than a century’s worth of gains… and nobody’s talking about it.
That’s why on Wednesday, December 8, at 8 p.m. ET, I’m holding my special Final Halving summit… where I’ll share details of six tiny altcoins that I believe can soar even higher than bitcoin.
Friends, the Final Halving will only happen once… I predict it will pull forward a century’s worth of halving gains in as little as 12 months. All while Wall Street and mainstream finance are completely in the dark.
So, if you’ve missed out on the life-changing gains we saw from bitcoin’s first three halvings, I urge you to attend my free event.
Let me show you how to pull forward a century’s worth of halvings in less than a year…