🧠 How To React When a Stock Crashes


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Welcome to Long-Term Mindset, the Wednesday newsletter that helps you invest better.

Today's Issue Read Time: <2 minutes

  • Lesson: A key trait for long-term growth
  • Timeless Content: Recessions & bear markets under U.S. Presidents
  • Thread: 20 Semi-controversial investing beliefs
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Friends,

As a beginning investor, I (Stoffel, here) learned the most important lessons the hard way. This one has to do with the intersection of curiosity and confidence.

In 2010, I was very bullish on Rosetta Stone. When the company came out with an earnings report the market didn't like, the stock fell by double digits. I immediately rubbed my hands together and thought, "Those suckers have no idea what they're doing. I'm increasing my stake." I was supremely confident.

That didn't turn out very well for me.

The stock just kept going down. Finally, I realized questions about the strength of the company's brand -- and its moat -- were totally valid.

I ignored the evidence right in front of my face. And I paid the price.

The upshot: it taught me a VERY valuable lesson: when the world reacts in ways that surprise you, above all else, BE CURIOUS!

Nassim Taleb once said,

"Curiosity is antifragile, like an addiction, and is magnified by attempts to satisfy it."

These days, when the market punishes a stock that I own, and I am surprised by it, I pause. I don't automatically do anything -- buying or selling.

I try to give a wide berth to the idea that others might know something I don't. And I try to get curious about it.

It's painful and, at the start, pretty dissatisfying. But over the long run, it's led to some very profitable decisions.

As my wife recently reminded me, getting curious about life's surprises can benefit you pretty much everywhere in life: relationships, politics, parenthood -- you name it.

In that sense, curiosity is a staple of developing a long-term mindset.

Wishing you investing success,

Brian Feroldi, Brian Stoffel, & Brian Withers

Long Term Mindset

P.S. It's earnings season! Want to hear our latest thoughts? We cover a lot of company earnings on our YouTube channel.

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Are you wondering what will happen to your stock portfolio under the new administration? Ben Carlson, a portfolio manager at Ritholtz Wealth Management LLC, shares the historical data on Presidential Terms, Recessions & Bear Markets.

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Aaron Bush
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11:28 AM • May 24, 2020
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Have you ever had a personal finance question and wondered if there was a calculator to help you decide? This website contains 188 calculators to help make decisions about credit cards, mortgages, tax, insurance, retirement, investing, small business, car buying, and more!

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Brian Stoffel

Brian Withers

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VIDEO: Cash Flow Statement Red Flags​

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Long-Term Mindset

I teach investors how to analyze businesses. Each Wednesday, I share six pieces of timeless content that can be read in less than 2 minutes. Read by 100,000+ investors from a16z, Amazon, Google, Microsoft, and more.

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