Fair point. By playing with the same amount of money each time, I can repeat the conditions and my behaviour. That is, I can easily 'yolo' the same amount in a year and behave in the same or similar manner. The reason being that changes in circumstances significantly alter our behaviour and perception. By simulating the conditions I can possibly emulate the behaviour and thought process.
I understand that this sounds like a rationalising gambling behaviour, and in part it is, but on the other hand, making money it is a multi-objective problem.
Maximize net worth subject to minimizing risk and time.
There are many ways to play this; you can throw a considerable amount of money in stuff like AAPL/MSFT and so on, and that is a good position to be in, infact MSFT went up 350% IIRC in the last 5 years, that's nearly +35% YOY.
Alternatively, you can gamble small amounts and capitalize on the FOMO by identifying bubbles, riding them, and getting out fast enough by not getting too greedy. This isn't the best strategy long term because you can miss good opportunities, like AMD, but this falls into acquiring more domain knowledge. Plus it sounds like trying to time the market, as many do, but I disagree. Many who try riding the bubble try to time the peak. I disagree with that approach. The goal is to get out fast enough to outpace the market.
> Plus it sounds like trying to time the market, as many do, but I disagree.
You can disagree all you want, but this is attempting to time the market. It’s literally the exact thing that’s repeatedly warned about. Trying to be the next-to-last out in a Ponzi scheme is a dangerous game, and one that many “smart” people have lost.
That’s not to say that some people won’t succeed at trying to time the market. It’s just essentially roulette: you can do well for yourself or you can lose money, but on the whole it’s a losing proposition and winning isn’t particularly correlated with skill. And—perhaps more like poker—even repeated bad plays can be rewarding in the short or even medium run.
Also like poker, taking big gambles can be profitable in the short term, but any time you put your bankroll on the table you’re risking going bust. Even a 10% chance is going to send you back to square one eventually.
Other than exceedingly rare cases, people who perform well in the markets don’t seem to be the same year-over-year, except at the rate you’d expect from random chance. Smart plays can turn catastrophic, bad plays can be profitable, and it takes a lot of honest introspection to assess whether or not a play was smart or simply bad but lucky.
I bought into AAPL early in my investing career. It was right around when Rails was taking off. I saw a UNIX system with great interface design and better stability than popular Linux distros, and developers flocking to the platform for tools like TextMate. I knew AAPL would take off in the end if they were grabbing such developer mindset.
I was right, but for all the wrong reasons. AAPL took off, but it was pretty much just because of the iPhone. It had nothing to do with what I thought it was, and in the end I was just lucky. That’s a lesson that stuck with me.
I understand that this sounds like a rationalising gambling behaviour, and in part it is, but on the other hand, making money it is a multi-objective problem.
Maximize net worth subject to minimizing risk and time.
There are many ways to play this; you can throw a considerable amount of money in stuff like AAPL/MSFT and so on, and that is a good position to be in, infact MSFT went up 350% IIRC in the last 5 years, that's nearly +35% YOY.
Alternatively, you can gamble small amounts and capitalize on the FOMO by identifying bubbles, riding them, and getting out fast enough by not getting too greedy. This isn't the best strategy long term because you can miss good opportunities, like AMD, but this falls into acquiring more domain knowledge. Plus it sounds like trying to time the market, as many do, but I disagree. Many who try riding the bubble try to time the peak. I disagree with that approach. The goal is to get out fast enough to outpace the market.