How Do (Should) You Invest?

Random Words from our sponsor, Public.com

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Jeff’s Random Words

I’m not always a patient person. Once I get my mind set on something, it’s difficult for me to wait to do said thing. Here’s an example from my investing. I own Celsius Holdings (CELH) and have for a while. Based on my rough method for deciding where to invest my capital, it had been at the top of my buy list for several months. However, because my method for buying is a framework and not a rule, I ignored this for a while because I felt that Celsius was expensive, despite it being significantly less expensive than where I initially bought it.

Eventually, I caved and bought shares on March 26. Since that day, Celsius has dropped 13%. Had I been patient for a few more weeks, I could have capitalized on this drop. And who knows where it will go from here?

Of course, this is hindsight bias, I had no way of knowing the market was going to have a bad week, or that Celsius would fall this much. But it does make me wonder if I should have stuck to my gut feeling about the stock being expensive and just waited. I think in the long run this purchase will work out fine, but I’d be lying if I didn’t think about it.

This is an example of how I am always trying to learn, but also what I think is the strength of averaging into positions. Sure, I may have added a little to my Celsius position at a time when it was more expensive, but it’s still less than 1% of my total portfolio so it's not going to be materially impactful to me no matter where it goes from here. This can help me overcome my lack of patience as I work to improve that aspect of my investing. 

I think for most investors ETFs and index funds are the best way to invest. Then, for nerds like you and me who read newsletters on Sundays, buying individual stocks but averaging into them is probably the smart way to proceed. Taking much larger bets on being right about the price is something I think should be only for those who are very comfortable with valuation and have a decent risk tolerance.

What do you think? Am I way off? Does this make sense? Comment on this post or reply to the email and let me know.

Jeff