Cheytax Management LLC@Cheytax_1
WRONG IS PART OF THE GAME.
Lately, a lot of portfolios are getting absolutely wrecked. Down 20%, 50%, even 75%. If we could learn a thing or two from why is that happening? Simple.. humans are wired to avoid being wrong. Nobody wants to be wrong in this world, hate it or love it, that’s just nature or by design..
"Siapa sih yang mau salah?"
You see someone down 30–40% in a "safe" name like ICBP or even BBCA. Low volatility type of stock, cash generating, ok growth is not as usual but.. hey.. low expected return too tho, daily movement average is at 1-2%, how come someone is down nearly half their money there? Not the stocks that are bad, just how they react to the market that is wrong.
Instead of cutting, people start justifying:
"Businessnya masih ada kok"
"Kata si ini mau dikerek ke xxxx"
"Bottom lah udah max fear"
"Dividend ada kok"
Technically, not wrong. But in the public market, there are two axes. Just look at the formula for Total Shareholder Return or TSR:
((P1 – P0) + D) / P0
P1 is latest price.
P0 is average price you paid.
D is dividend.
The company pays you a dividend. But the deviation between price movement and dividend is apples to oranges. Price can swing ±30%, while the dividend gives you just 5-10%. If the stock hit -30% drawdown, that dividend becomes irrelevant.
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No matter how good your strategy, how solid your thesis, how impressive your RMSE, CI, or IR… eventually, you will be wrong. And.. you can be wrong all the time and still make life changing money. The only condition? You admit when you're wrong. Admit it that humans are DOGSHIT at investing. Dogshit at predicting where the market goes tomorrow. We're all stupid. Not just you and me, all of us. The longer you're in this market, the more you realize that "The market is RANDOM".
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We ran a simulation, just on the JCI. Assumed we're betting on the index. Wrong 60% of the time, right 40%. In one scenario, when we were wrong, we did nothing. In the other, still wrong 60%, right 40%, but when we were wrong, we cut at 50% of the forecasted move.
*Example: you bet JCI will go up 5%. It goes down 5%. So when the loss hits -2.5%, you get out.*
The "stubborn and feeling like the smartest person in the room" strategy.. ofc smoked.
The "Okay, I'm wrong, move on, we're all dogshit at predicting price” strategy.. generated ridiculous CAGR. 19.89% from a single ticker… JCI.
So what's the catch? You can be wrong most of the time and still make life changing money. Your performance beats 99.99% of investors out there. Your alpha is unmatched. You make index returns look like SHIT.. all if you... admit when you're wrong.
Admitting you're wrong is just as important as picking the right company to buy. You take all these classes, paying 5 to 50 million for this or that, but when it's time to execute, you act like it's your first day in the market. "I'm right, the market is wrong" Stop attending expensive classes if you think you'll be right all the time. Useless.
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And drawdown management *the thing most people take lightly* ends up destroying long term CAGR. Think of the market as binary: predictable vs unpredictable. When it's predictable, you play, fine, you make billions, maybe trillions, whatever. But when it's in the unpredictable phase, you still bet. And when you're wrong, you don't admit it. That's the crucial part. Why?? Because when the market becomes predictable again.. you're no longer playing with the same capital.
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"Jangan cut loss"
"Kalau company-nya bagus, akan balik kok"
Not wrong... But we all know what it does to the CAGR.
