This week I go over some of the benefits I have had by keeping a journal. One of the better tools I have for dealing with the volatility in the uranium and commodity markets.
First of all, I write a journal, not a diary. For me this means I write to analyse my thinking and experiences in life, and in the markets. Not my innermost secrets or anything like that. I write about my ups and downs in the portfolio to see where my head is during good and bad times. I do not write every day, but I do write when I have a need to clear my head. Getting the thought out of my head and “on paper”. I have found it just as important to keep perspective when things are going great as when they are bad.
Some of the drawdowns
I have journal entries from 13. July 2019 where my then two biggest positions, Energy Fuels and UR-Energy fell 36.5 and 33.9% in a day. When I wrote in my journal that day I reflected on getting caught up in the Section 232 hype and what I could learn from it. Still, I have gone over it afterwards to see if I would have done anything differently, and I do not think I would. The odds were good, and a possibility of a loss was something I was aware of in advance. It was just not something I was aiming for. I also made a note to myself about the people who have made a lot on their investments have gone through drawdowns similar to mine. Them being successful is not just luck, and people who discredit them usually have their own problems.
Looking back on this now, the loss (in dollar terms) is about a 4% drawdown of my portfolio value today. It could still be a move outside the normal daily moves, but my added investments (and the increased value of the portfolio), have made it appear less than it did at the time.
What I did not remember was that the shares continued to drop for a long time afterwards, and that the Cameco presentation on 25. July 2019 added to the selling of the sector. (I have afterwards always been more reserved than others for what Cameco have to say at their presentations). I did not trust my stock picking abilities at the time and preferred to invest in the HURA ETF after this lesson.
Moving on to 2020 my portfolio had an even worse experience with the March 2020 sell off. The value of the portfolio went down 50% from what was the value at my previous top in July 2019. (The only thing that did not push it lower than 50% was the USD and CAD appreciated in value compared to my home currency, the NOK). I had added more than 50% of my take home salary every month to the sector for over nine months and seeing it go down by half was the hardest time for me (so far) in the space.
I have to admit that on one of those March 2020 days the thoughts of capitulation were as close as they were ever going to get. I considered going into my account and just stopping the bleeding and putting myself out of my misery. I have been saving my whole life, and when I saw years of my savings disappear in these investments at a very fast pace it felt like the bottom just fell out. Going through drawdowns are easy on paper, but hard in practice.
The funny thing about 2021 is that I already have forgotten about a correction in my portfolio around February and March 2021. The drawdown was mainly from my precious metals portion going down a lot and my uranium positions were not compensating for them and also correcting some. My portfolio did go down by about 16% in this period, but it was a very short while before it turned up again.
I think the reason for me forgetting is that I made some cash available and got shares “on sale” during this correction. I was therefore still able to be on the offensive during this drawdown. (Something I did not have to the same extent in July 2021). You have to run a balance of having cash available for drawdowns, and not missing the boat with money at the sidelines when share prices are going up.
A thing I also think people do not have enough focus on is what to do when things are going great. Your mind is just as prone to play tricks on you at these times, both in terms of increasing your risk tolerance because of a winning streak, or that you sell out of a win too early.
We have multimillionaires and billionaires talking about selling 50% at a double, and riding the rest for free in interviews. This is not how they became rich. They usually white knuckled a great investment from the bottom to the top.
As the value of my portfolio got bigger than I could imagine by February 2021, my head had to adjust to this. My inner critic told me “Quit while you’re ahead.” As your portfolio valuation increases you have this feeling that you are on the way up to the top of a giant roller coaster. The biggest temptation then is to at least take some profits off the table.
That you have a plan with a rule based exit strategy to follow is essential here. You also have to look if anything has changed towards your investment thesis. If you sell before any change it is more based on your psychology than anything else. I also look to historical figures, and even though I know there is survivorship bias, there are lessons to be taken from them. If John D. Rockefeller or Andrew Carnegie sold down their positions by 50% (in oil and steel) after reaching an arbitrary value of maybe $5 million, they most likely would not be remembered by posterity. Having an arbitrary number in our minds is something I believe many of us have. I do not have plans to reach anywhere near these tycoons’ levels, but I do not want to limit myself by selling 50% and riding the rest for free.