Stocks Can Go Down

It’s easy to forget that stocks can go down when the market is going up. I don’t know who said it or what the exact saying is, but as David Gardner said, “Stocks go down faster than they go up, but go up more than they go down.”

I want to stress a few points in Asymmetric Frameworks that are key at times like this:

• We need to think in years and decades, not days and weeks. This is our biggest advantage over the market.

• You should feel greedier when stocks fall and more fearful when they rise.

  • Buying when sentiment is bad is hard, but it’s key to asymmetric returns.

• Uncertainty is our friend.

If a stock falls despite great financial trends, that’s good news for us as investors.

These are easy words to write. They’re simple to understand in theory. They’re more difficult to live through.

Amazon’s Asymmetric Returns and Volatile History

$Amazon.com(AMZN)$ is a perfect example of an asymmetric stock that has been a massive winner for investors since its IPO.

But if you think this was an easy ride for investors, you’re wrong. Amazon’s stock fell over 80% twice and was down over 50% in 2007, 2009, and 2022.

Even great companies that grow consistently for decades have volatile stock prices.

NVIDIA’s Rollercoaster

$NVIDIA(NVDA)$ is an even wilder story. It’s been a massive winner, but do you think this was easy to hold for decades?

NVIDIA stock has fallen over 80% three times since 1998, over 50% in 2018, and over 60% in 2022. It was a money loser for nearly a decade from 2007 to 2016. But if you had ridden it out or bought more at low points, it was a huge winner for investors.

I don’t know if any of the stocks in the Asymmetric Portfolio are the next Amazon or NVIDIA, but that’s the goal. And huge returns will come with volatile stock prices. We were on the downside of that this week.

It’s all part of the process.