Every ride is unique (The Financial Athlete #102)

Long ago, a friend who regularly surfed until sunset told me, “Every wave you ride is unique. Other waves may feel similar, but you’ll never repeat the same, glorious experience.”

There are investors who try to repeat the same experience of a spectacular gain with the same stock. After selling their position, they keep it on their watch list and wait for it to retrench 30%+. If it retrenches as much, they jump back in, expecting another exhilarating ride. More often than not, they find themselves buying a stock which declines further or trades sideways for a long time.

To try to repeat success with the same stock is usually a failed approach. Market conditions change. For example, since you sold the competition has intensified or the company’s products are toward the end of the product life cycle.

Higher historical prices do not point to where the stock price is headed. If you reinvest in the same stock, do so after doing fresh due diligence with a skeptical eye, as though you are studying the stock for the first time. Don’t let emotions of gratitude for past success hamper your judgment. Be impartial.

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