Nails
“What a man wishes, that also will he believe.” —Demosthenes
All is apparently well in the stock market—at least it was this past week. The S&P 500 had its best week of the year, rising 3.9%—just 2% shy of its record close last month. The Nasdaq was up 5.2%, and the Dow rose 2.9% on the week.
As markets recovered from a few recent days of downward volatility, it may be a good time to look at your portfolio and see if you have any holdings that are causing you problems—in either lost profits or lost sleep—and that may need to be disposed of as markets have become a bit more optimistic once again.
In a recent talk at the Stanford Graduate School of Business, Graham Weaver, founder and managing partner of Alpine Investors, discussed the difficulty one often faces admitting to and dealing with even the most obvious of problems:
About a decade ago, a short video made the rounds online. It starts with a close-up of a woman talking about the pressure she feels. She has headaches; she can’t sleep. Then, as she turns to her partner, we see her forehead for the first time—and he says, “Well, you do have a nail in your head.” But the woman balks at his suggestion that removing the nail might solve her problems. She insists, “It’s not about the nail!”
So many of us do this. Some of our metaphorical “nails” are as obvious as the one in the video; others less so. But either way, when we don’t deal with them, we stay stuck.
While Weaver uses the nail video as an analogy for dealing with life, it can also apply to one’s investment portfolio. Sometimes, we know which investment theses haven’t worked out—which might make us worry, but we, possibly, have found new reasons to justify holding on for a bit longer.
Sometimes, it’s a good idea to hold on. But often, our inner voice tells us something that may seem obvious to those with an outside view: Pull out the nail and move on to better things.
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The Security Analysis Podcast: Adam Mead: The History of Berkshire Hathaway
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Meet The Investor Who Made Bill Gates $50 Billion: A Michael Larson Documentary
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