2021 Diversification beats Arrogance (Journey and commentary)

As 2021 rolled out I was, as always, cautious. I kept buying good fundamentals and editing my ideal entry price to some tech stocks I have kept an eye on.

I had used margin to leverage myself 2-4x throughout 2020 and I knew this was risky. Compounding risk by buying risky stocks or leveraged ETFs wouldn't be wise.

I had beaten indexing in 2020 and I made the occasional post laughing at people yelling about risk adjusted returns as if that matters. I had more gains than them and all they could do was yell about how risky it was. These are the kinds of people who would pay off a 1% mortgage because holding VTI is too risky. I would take that money into VTI and say this is not risky enough. Oh there were stories about just holding all TSLA or all [redacted] and this and that but I had made several plays on various stocks including a little TSLA and a little SPWR and I was satisfied. I continue holding gold mining stocks.

I was at times swamped with Earnings Reports and Earnings calls but I knew one thing and one thing only.

“You will not predict the future and no one else will, the best gains are made with calculated bets”

So I kept my diversification going and adjusted (especially on weeks where 20 Earnings Calls happened in 3-4 days) by ranking my picks from safe with 100% conviction on long term vision (50 years) to risky and has to be reviewed regularly. Then I caught up as I had time. By May it was obvious that I had “missed” a wonderful GME opportunity and of course I did. Those who had calls going into January 2021 that expired later that year probably had a chance to retire.

With each wild and irrational swing down I bought the dip and each wild irrational swing up I sold off some of my positions. I was leveraged so naturally I was holding far more in every stock than I could without that leverage, it was rewarding. When I wanted to take a few weeks off in the summer I did. Most weekends I do a blackout on finances and economics on Friday Close and only take a disinterested glance on Sunday evenings.

When politics caused some of my picks to shoot up 10-20% in a week I sold off until I was just holding my long term positions as if I wasn't leveraged. With this market the volatility nearly always allows a lower entry later. Sometimes a week later. Remember I am leveraged so short term profit taking is necessary to take full advantage of what the risk affords me.

When the market sometimes judged a guidance or a short term supply issue as a reason to sell off a stock, I reviewed the fundamentals and bought more. I am not holding stocks that don't have a great long term business model that works today, not just in theory.

By October I had decided my appetite for risk had been fulfilled and I needed to deleverage. sold off what I could and by early November I was less leveraged than I had been since April 2020. I saw the corrections and entered some tech positions that I found at comfortable prices. You know what happened next, the dip kept dipping.

Entering 2022 I am still up on most of my positions. I have compounded gains due to the way I approached risk. I have removed some stocks from my watchlists that have been unable to adjust to our new economic reality in 2021 and their debt has expanded while their earnings have not done so well adjusted for inflation since 2019.

TLDR So here I am. 'The crash is coming'. I have beat indexes. I am diversified. I have managed my risk level in a way I find comfortable. I will do it all over again this year. Some will panick or play into some wild conspiracy theories while the wise will take their money and nod.


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