A Word of Caution

clmason · Feb 23, 2015

For those of us who have been here for a long time and caught TSLA early, it can feel like we are investing gurus. Some of you may indeed be gurus and brilliant investors. However, I am not, I think 99% of us are not, and would like to humbly share a thought about prudence, conviction and investing, especially to those who had a windfall with TSLA.

Observing this forum and other related forums, I am seeing some folks are now looking for the next big opportunity to capitalize on. A few of the smartest and most respected contributors have chimed in over the past 6 months with their next big move, doubling down, going all in, or just starting their due diligence.

A few thoughts:

1) Investing in TSLA early was a very smart move. Being very smart in this instance does not give you investor guru status. In fact, it can give you a false sense of expertise that will come back to bite you and your sphere of influence. It does not feel good to lose your money, it feels worse to lose your family and friends' money.

2) Forum Contributors here who got in early with TSLA, made a lot of money, post well researched posts... they are not investment gurus either. They were in the right place at the right time with the right amount research and guts. This unique setup may never happen again. It was a combination of luck and conviction.

3) TSLA at $200 today is still a massive opportunity. They do indeed have potential to become one of the largest capitalized companies. Hold the line, even if it takes 10 years. (my opinion here)

4) Do not squander your windfall hoping to see another short term 10X gain. More likely you will lose it. If you truly believe 10X gain in the short term is possible with a given opportunity, take a position and average in on the rise. No one looks back at TSLA and is upset because they kept buying at $20, then $40, then $60, then $80 and so on. You would have great gains if you did this and would have been protected if it went $20 to $40 and then back down to $20.

Maybe I'm preaching to the choir but this was on my mind after reading a few posts here and elsewhere. Take of it what you will.

bluenation · Feb 23, 2015

very good points, and sage advice that should be universal knowledge by now (esp after the events of recent years in stock market history....), but sadly is not.

here's the thing, kids: the stock market is a russian roulette. Except there's far more than one bullet.

unless you are warren buffet, all of you are stock market amateurs (i mean this in a neutral way, dont get offended) - you playing casino here. simple as that.

you want actual investments that work for 99.99% of avg folks? three words: passive index funds.

wycolo · Feb 23, 2015

If anyone who bought under 50 (or 100) still is holding then its time to sell most and diversify. People who run money know this. Holding a bag of greatly appreciated stock is extremely risky. Hand the bag over to a money manager and get on with your life.

For grins you can play the ups & downs of TSLA since likely your mgr will have little or none of it in your portfolio. $10 rise, sell half. $15 rise, sell the rest, that kind of game. There are what, six or more such cycles per year. Pay your taxes on each sale.

Expecting an AAPL-like rise for TSLA to 600- or 1000- to justify sitting pat is wrong since you are not making money on these mini fluctuations. Look what happened to a lot of the tech-bubble 'know nothing' holders; while they weren't looking they lost it all, or most of it.

> and would have been protected if it went $20 to $40 and then back down to $20.

You slept thru this one and lost an opportunity as did all the know nothings, of course. Its a 5 day a week job and one can't afford to keep making these mistakes on a regular basis.
--

hobbes · Feb 23, 2015

clmason: Well said, agree with all points.

Krugerrand · Feb 23, 2015

wycolo said:
If anyone who bought under 50 (or 100) still is holding then its time to sell most and diversify.

You're assuming those people a) aren't already diversified and/or b) bought such a significant number of shares in the beginning, which now makes their portfolio undiversified. That's two too many assumptions.

republic · Feb 23, 2015

In my opinion, whether to hold on to a windfall depends on future growth and execution risk. A colleague of mine bought AAPL a decade ago ($2 a share) and is still holding on to it - he could buy a whole bunch of Teslas with those holdings.

Canuck · Feb 23, 2015

clmason said:
Being very smart in this instance does not give you investor guru status... If it does not feel good to lose your money, it feels worse to lose your family and friend's money.

Good advice.

I never give stock advice to anyone, ever. I don't care how well I have done, which includes buying SIRI when it was near bankruptcy, APLE and GOOGL years ago, Canadian Bank stocks, and many others that have done very well. I consider myself "lucky" and not having "investor guru status" and I am well aware that, as early as tomorrow, I could find it all come crashing down; and if not tomorrow, someday it will, it's only a matter of "when", not "if". I like my family and friends too much to have them risk their money based on my advice. I also only risk of mine what I can afford to lose. The stock market is a form of gambling, pure and simple, and anyone who tells you any different is guilty of wishful thinking.

Robert.Boston · Feb 23, 2015

I put a modest amount of my IRA into TSLA, and it's become a significant amount. But as a fraction of my total investable wealth, it's still in the single digits. So, I continue to hold TSLA and to do some trading around the edges.

Why?
- I know more about Tesla than nearly every investor, which lets me make informed decisions.
- I have personally met most of the senior management at Tesla and I feel comfortable with their capabilities.
- I am comfortable with the basic investment thesis.

Because of these factors, I've been willing to make both long and short-term investments in TSLA, and along the way learned some useful lessons about trading that can only really be learned in practice. While I still wouldn't hold myself out as an investment expert, it's been not only a profitable but an educational three years.

anticitizen13.7 · Feb 23, 2015

clmason said:
For those of us who have been here for a long time and caught TSLA early, it can feel like we are investing gurus. Some of you may indeed be gurus and brilliant investors. However, I am not, I think 99% of us are not, and would like to humbly share a thought about prudence, conviction and investing, especially to those who had a windfall with TSLA.

Do not squander your windfall hoping to see another short term 10X gain. More likely you will lose it.

I definitely agree that this is prudent advice. I bought into TSLA fairly early, but I was able to recognize the opportunity because I had studied automobiles and transportation systems pretty extensively over the course of years. I'm not counting on this specific expertise to help me find the next big one.

bluenation said:
very good points, and sage advice that should be universal knowledge by now (esp after the events of recent years in stock market history....), but sadly is not.

here's the thing, kids: the stock market is a russian roulette. Except there's far more than one bullet.

you want actual investments that work for 99.99% of avg folks? three words: passive index funds.

Vanguard is a company that's often talked about here, and I both use and recommend Vanguard index funds and ETFs for core retirement holdings.

wycolo said:
If anyone who bought under 50 (or 100) still is holding then its time to sell most and diversify. People who run money know this. Holding a bag of greatly appreciated stock is extremely risky. Hand the bag over to a money manager and get on with your life.

For grins you can play the ups & downs of TSLA since likely your mgr will have little or none of it in your portfolio. $10 rise, sell half. $15 rise, sell the rest, that kind of game. There are what, six or more such cycles per year. Pay your taxes on each sale.

Expecting an AAPL-like rise for TSLA to 600- or 1000- to justify sitting pat is wrong since you are not making money on these mini fluctuations. Look what happened to a lot of the tech-bubble 'know nothing' holders; while they weren't looking they lost it all, or most of it.

> and would have been protected if it went $20 to $40 and then back down to $20.

You slept thru this one and lost an opportunity as did all the know nothings, of course. Its a 5 day a week job and one can't afford to keep making these mistakes on a regular basis.
--

I think there's a difference between the 2000 tech bubble and TSLA. In 2000, any company that went public that had any association with the Internet reached extreme valuation regardless of whether the company actually produced something valuable or not. I remember being at trade shows and thinking that most of these new companies had products of dubious utility and no real long-term plan. Within a year or 2, most had collapsed or been sold off at a tiny fraction of their inflated value.

Tesla is different because it produces a product that buyers find valuable, and because Tesla has a goal (a great, reasonably affordable Model 3 EV and volume of 500k vehicles/year when the Gigafactory is at full capacity).

I think your advice might be most appropriate for people who became Teslanaires. If one is fortunate enough to have made a few million on TSLA, it does make sense to cash in and stop playing the game while one is ahead. A lot of us here though, including myself, hold fairly small amounts of TSLA. Cashing out now would not yield any significant amount of money in my case, but there's potential huge upside with Model X, Gigafactory, and Model 3 in the pipeline.

The bulk of my portfolio is in 401(k) and IRA plans that are in index funds and locked away until retirement age. If TSLA crashes to 0, it sucks for me, but it was money that I could afford to lose.

GLDYLX · Feb 23, 2015

anticitizen13.7 said:
I definitely agree that this is prudent advice. I bought into TSLA fairly early, but I was able to recognize the opportunity because I had studied automobiles and transportation systems pretty extensively over the course of years. I'm not counting on this specific expertise to help me find the next big one.

Vanguard is a company that's often talked about here, and I both use and recommend Vanguard index funds and ETFs for core retirement holdings.

I think your advice might be most appropriate for people who became Teslanaires. If one is fortunate enough to have made a few million on TSLA, it does make sense to cash in and stop playing the game while one is ahead. A lot of us here though, including myself, hold fairly small amounts of TSLA. Cashing out now would not yield any significant amount of money in my case, but there's potential huge upside with Model X, Gigafactory, and Model 3 in the pipeline.

The bulk of my portfolio is in 401(k) and IRA plans that are in index funds and locked away until retirement age. If TSLA crashes to 0, it sucks for me, but it was money that I could afford to lose.

Ditto, all over the place... Rather than sell my TSLA shares, I'm spending my monthly "play" money on other company stocks to stay properly diversified. I don't consider what I stick into my IRA and HSA to be "play" money.

My original plan is/was to sell some/all of my TSLA to pay for my Model 3, but my plans are never written in stone... I'm nimble-minded that way. Perhaps I'll sell something else, but it WOULD be pretty cool to be able to say that TSLA bought me my Tesla.

And hey, if TSLA drops to bargain basement prices due to outside factors and I still like the fundamentals, I'll buy a few more shares, if it doesn't skew my portfolio too much.

Happy Monday!

neroden · Feb 23, 2015

wycolo said:
If anyone who bought under 50 (or 100) still is holding then its time to sell most and diversify.

Pffft. Only if you bet all your money on TSLA in the first place. It was a tiny portion of my portfolio to start with; it's still a small portion of my portfolio even after the massive growth. Do not sell just becuase of "diversification" if you're already diversified enough.

----

I do consider myself lucky to have found this investment opportunity -- and overly conservative for having invested so little in it. Most years, I find no good investments. I've found a lot of business sectors which I know intensively, and which I know are going to boom (and they do boom), but with no reasonable way to invest in the boom (all the good companies are private, for instance, or the competition is fierce and it's hard to tell which company will surive). This sort of thing is so common. Finding a case where only one company is betting the right way is really, really rare, and that's where Tesla was at its IPO.

- - - Updated - - -

Canuck said:
I never give stock advice to anyone, ever.

I will give generic "investment philosophy" advice, but I do not give stock advice either.

- - - Updated - - -

Canuck said:
I also only risk of mine what I can afford to lose.

Rule one of investing right there.

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A Word of Caution

clmason

Member

bluenation

Member

wycolo

Active Member

hobbes

Active Member

Krugerrand

Meow

republic

Member

Canuck

Well-Known Member

Robert.Boston

Model S VIN P01536

anticitizen13.7

Not posting at TMC after 9/17/2018

GLDYLX

Member

neroden

Model S Owner and Frustrated Tesla Fan

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