Sounds simple, right?
The sheer numbers ( , baby) strategy outlined in the last post?
Well, hmmmm.
What’s simple to someone need not be so to another.
In fact, no one’s going to do it this way, perhaps, almost.
Why so?
For starters, it is the toughest thing in the world to let go of a loser.
Takes years, maybe decades, to become comfortable doing so.
For something like this to actualize, one needs to rewire completely.
Without many hits and knocks on the head, rewiring is not possible.
No one rewires just like that. Only after full tuition fees. Losses. Beatings. Lessons.
Learnt.
And then, on top, we’re being told to add the proceeds to our highest winner.
All lessons in valuation are screaming. Our normal wiring is screaming. Our fingers refuse to punch in the orders. Until we understand the logic.
Something growing rapidly proves so by being your best performer.
No one knows how much growth is left to happen.
All one has is a conjecture, an estimate, a prognosis.
At best.
Nothing more.
You do know one thing though.
This champion grower is allowed max runway in your folio, because it needs to traverse the most distance to becoming the worst performer, who is the kick-out candidate.
So your champion is given the most time to show more spurts of growth. Since you don’t know when these come, owing to the non-linear nature of high growth, you are allowed the privilege to being there the longest in your champion, in an effort to harness multiple spurts. The chances of the champ being kicked out are the lowest at this time.
Then you load up. Buying average goes down. Top guy is now number 2 or 3. No more loading next proceeds into. New number 1 gets new proceeds. Fund accumulators rotate thus. These are good enough candidates too, hovering around the top of your folio. Funds flow into strength. Thus.
After some years, certain holdings continue to perform, and reach multibagger status. You’re represented maximally as per your capacity — the strategy has seen to it. Others got some loads and started to lag. Well above exit level though. Then they catch a spurt and start topping again.
A few head below.
Some even manage an exit.
It’s ok.
You lose 60-70% on the losers exited initially. Over the years, the exit baseline moves up and up. After some years, exits are winning, not losing, since the worst performer in the folio is itself a thin winner. Trajectory is ok.
What are you winning in your top 10 after 10 years?
Are all of your top 10 multibaggers? Likely.
What’s the upside?
In a growth market?
A potentially future high-growth market?
Who claims to know?
Exactly.
Upside…
…can be anything.
Think of a number. A reasonable one seeing the nature of the market.
What’s the 60-70% lost in some holdings?
Noise, right?
