What was your motivation to invest in such a way that 95% loss was even possible?
It always worked for me before. My investing history is a long string of huge successes beginning in 2014.
I've always invested in companies I believed in and that had solid fundamentals.
It appears the market doesn't give a shit about company fundamentals right now. Most small growth companies are down ~80%. The two companies I lost everything in are currently priced below liquidation value.
Yeah, I bought on margin, so that gave me 2x leverage, so if it goes down 50% you get margin called.
Like I said. I have learned lots.
@jeremyt care to elaborate on this thesis and wondering how you came to this conclusion, was it a self journey
I believe that my soul chose this life to learn what I'm learning. And whether I'm conscious of it or not, the "higher self" part of me hangs around in the background to ensure that I learn what I need to. This isn't typically what one would expect from what other religions would call a "guardian angel", but that's kind of how I see it.
Like, sometimes I can't take losses. That's deep family karma from being afraid of being poor. However, being unable to take losses means that you make poor decisions. Not being able to make good financial decisions makes people poor, and just continues the intergenerational cycle of poverty.
So, my unconscious "higher self" carefully arranges events such that I encounter maximum pain for going along with this karmic thing I'm supposed to transcend. The pain facilitates the learning, and thus the freedom from the karma.
Ultimately, the point of existence is to experience everything that can be experienced in every lifetime and learn everything that can be learned, resulting in ultimate freedom from karma and liberation from the cycle of birth and death.
Or, you can just meditate a lot, and I guess I'm working on that.
Strategies that result in 95 % drawdowns are not in the "making you money" bucket.
Since growth is compounding[1], the most important property of a money-making strategy is to keep drawdowns at at optimal level. This optimal level is a thrill ride on its own, but 95 % is plain overbetting and will never make you money in the long run.
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[1]: If you draw down from 100 to 10, it takes as long to go back to 100 as it would have taken to go to 800 had you only drawn to 80.
As long as you're betting with +ev after fees are taken into account then they certainly can make you money. Low sharpe / high vol != unprofitable.
Once you look at a long sequence of large bets (where 95 % drawdown absolutely indicates a large bet), you'll find that those where big drawdown can happen grow slower because a big drawdown simply sets you back too far. It's worth earning a little less for each bet if none will cost you a huge loss.
Like, just my pov - but their years of growth are done and the competition is in.
And as long as you truly learned things, and apply them later[0], then it is not money wasted. I graduated from Wall Street University about fifteen years ago, and paid some steep tuition fees, but I came out a better investor for it with consistent returns. (For clarity, WSU is not a real university, but a metaphor for “blew a lot of money in the stock market”.) Take those lessons learned, and go make even more than you originally lost.
[0] Examples including, keeping emotions in check or out of the decision-making process, disciplined stop limits/losses, and, umm, staying away from margin unless you have reasons beyond “margin let’s me buy more shares”. But these are my personal examples, go find your own. :-)
I don't think it ever did. I think it's all about the free money pouring into the economy due to low interest rates set by the federal reserve. They turned off that tap, the flow stopped and the economy screeched into a halt.
Fundamentals have never mattered all that much. Stock prices are based on demand for the stock itself, which is largely dependent on economic conditions. When the Fed was increasing the money supply a lot of that excess pumped up stocks because there was nowhere else for it to go, now that money is drying up causing the market correction.
Fundamentals matter over long periods, but in short time spans it is, as you say, about demand for the stock which can have nothing to do with fundamentals.
What price did you pay for those businesses? When you say they had solid fundamentals what does that mean? A pretty common mistake is to overpay for a business with good potential. Unless you have some unique insight everyone already knows the business has potential and it's priced that way. The market as a whole had crazy crazy multiples which means it was overpriced even including the growth prospects. Sure, if you think Tesla can get to a point where it's selling all the cars in the world then you definitely should buy that stock at the price it was trading at.
Overpaying on margin is just compounding your problems. I never ever buy stocks on margin (and generally I avoid borrowing money for anything but the most solid investment, like buying a house). You have to always think about the worse case scenario and be willing to live with it. Ofcourse gambling a lot of money can lead to making a lot of money- it's just that the expected value is negative.
The other thing you always need to consider is how the company you're investing in will perform in an economic downturn. Recessions aren't an if, they're a when. There's a certain chance of recession every year. If you believe the company has strong enough fundamentals to survive a recession and strong enough management/leadership to steer it through difficult times then just hold on. Presumably you have a mix of those so on the aggregate you should do ok. If these great companies are below book price then double down on them but keep in mind the market is disagreeing with your evaluation. Otherwise you've miscalculated the expected value of your investments i.e. your belief in the companies and their fundamentals was incorrect.
The path you took was not an advisable one. The wins of the past decade were way past normal. The game seemed too easy.
Now that you have the experience, go read bogleheads.org and begin to learn a more sustainable path to wealth. (It's still very much attainable, especially for the typical HN reader.)
Good luck.