Connecting Dots Thread #7 - A red button to instantly make you 100x richer, will you push it?

Nov 23, 2024

I won’t, here is my reasonings

In investment, the key aspect of long-term success is your mindset and mental stability. You shouldn’t deviate from your original plan just because of anxiety or fear of missing out. Instead, decisions should be based on previous experience, logic, and some level of instinct – and made consistently.

All of this takes time and practice. Let’s examine what would likely happen if a red button instantly made you 100 times richer.

Your portfolio’s volatility would immediately increase 100-fold. What was once a comfortable dip would become much less bearable. Here’s a simple calculation: Say you have a $100,000 portfolio in the stock market with a monthly income of $100,000. If you push that red button, your portfolio becomes $10,000,000. Previously, a 10% market dip would cost you $10,000, which could be easily covered by your monthly salary. But with a $10,000,000 portfolio, a 10% dip means a $1,000,000 loss – far exceeding your yearly salary.

This means a regular market decline would cost you several years’ worth of income. Could you confidently maintain your previous strategy? Or would you cash out the portfolio and move it elsewhere? Even if you did, would you sleep as well as you did before pushing the button? My personal answer is no. It takes time to get used to such wealth, and it’s better when it happens gradually.

Another reason is that we’re playing a long-term game. My goal is to stay in the market as long as possible, not to grow as high and quick as possible. I want to cultivate persistence and experience in investment while gradually maturing my understanding of the financial world. Doing things quickly and recklessly won’t help this goal; instead, it will sabotage it.

What about you? If you had the chance to push that button, would you?