Financial Pardons (Do Not Count on Them) and Taking Profits is Not a Crime

Before I get started, this made me laugh (reminder number 10 billion to be careful what you do online):

Today is Momemtum Monday, but due to some bandwith issues here in Tuscany I am pushing the show to tomorrow.

There are two charts that have captured my attention today. This first one is the returns for the S&P in post war bull markets:

The second is technology’s percentage of the S&P:

My reading of the two charts is technology as a percentage of the S&P could go much higher. My optimism is partially offset by my dread for the other side of this bull market.

Today, I actually sold some Apple. It’s once again too big a piece of my stock portfolio.

Announcing that I sold some Apple brought out the boo birds and people calling me crazy. I am used to that. If Apple was down 30 percent in three months and I added some back people would call me crazy for buying some Apple back because _________.

Because the buzzword of investing today is ‘compounding’, the idea of selling on the way up and/or taking profits has become something only bad investors would do.

Charts showing Warren Buffett’s wealth growth over his lifetime are all the rage.

Compounding is a fantastic, but how I behave with money is unique to me.

Speaking of money and psychology and behavior…PLEASE take the time to read Morgan Housel’s short essay titled ‘The Psychology of Money‘. One passage that rang so true:

..investing is not the study of finance. It’s the study of how people behave with money. And behavior is hard to teach, even to really smart people. You can’t sum up behavior with formulas to memorize or spreadsheet models to follow. Behavior is inborn, varies by person, is hard to measure, changes over time, and people are prone to deny its existence, especially when describing themselves.

Grace and Richard show that managing money isn’t necessarily about what you know; it’s how you behave. But that’s not how finance is typically taught or discussed. The finance industry talks too much about what to do, and not enough about what happens in your head when you try to do it.

I invest knowing that I will not be receiving financial pardons from a family member or politician.

Also published on Medium.