Don’t Sell Into Fear

Every investor dreads missing one of the biggest winners of their lifetime because they never owned it…

Worse still is getting it wrong entirely and losing your money.

But worst of all?

Doing both at the same time.

I’ve never felt more foolish as an investor than selling at the exact bottom… only to watch the stock soar afterward, making the person I sold to rich.

I locked in my loss.

I felt temporary relief in my certainty that it couldn’t possibly go any lower… And then I watched from the sidelines while everyone else won the game.

This scenario is emotional torture, and most of the time, we do it to ourselves.

I know I’m not alone. It seems to be a familiar pain for anyone who has been investing long enough.

In fact, the best investors all seem to have one thing in common: they got their butts kicked early on. They learned through pain.

A Lesson Hard Learned

Many of the world’s greatest investors have admitted they lost a fortune before they ever made one.

It happened to me too.

I took $2,000 from my first decent paycheck and decided I was going to become a trader.

I told everyone I was trading.

I told myself it was money I could afford to lose (I couldn’t) and also convinced myself I knew what I was doing (I didn’t).

I worked on Wall Street, for Pete’s sake. How hard could this be?

For a full month, I day traded the U.S. dollar/British pound currency pair. I placed 21 trades. And when the dust settled, I had lost 19 of them.

I quietly withdrew the remaining $200, closed the account, and never told a soul what happened. I swore I’d never trade again.

And, oddly enough, that turned out to be one of the best decisions I ever made.

I stopped trying to become a trader, and I became an investor.

I never looked back, content to leave trading to the traders.

Those painful lessons became the foundation of my career.

I’ve held stocks that went on to gain thousands of percent – returns I used to read about only in books like Market Wizards. I’ve built wealth for myself, my parents, my children, and many of my readers over the years.

But none of that happened because I became better at predicting tomorrow. It happened because I changed the way I thought about and approached investing.

The biggest lesson I ever learned wasn’t how to find some hidden wrinkle in a balance sheet or a secret strategy to uncover the next diamond in the rough.

The greatest boon to my investing wasn’t even buying Nvidia at $2.82.

It was understanding this important truth…

Emotion is the friend of personal relationships, but it is the enemy of investing.

Don’t get me wrong. Emotion has its place. It’s good to get excited about what you own, good to feel strongly about your investments in the sense that you have conviction in the investment.

Just don’t let that excitement and conviction turn into greed. And don’t let fear be your guide, making your decisions for you.

Because fear can replace logic. And when you get emotional and illogical about your investments, you put your wealth at risk.

Let me explain.

The AI Story Is Far from Over

One of the biggest investing mistakes I’ve ever made wasn’t buying the wrong stock.

It was letting myself get spooked and selling the right one at the wrong time.

Great businesses almost never travel in a straight line.

Amazon lost roughly 95% after the dot-com bubble burst. Apple fell more than 80%. Meta plunged nearly 77% as investors questioned Mark Zuckerberg’s leadership. Netflix has endured multiple drawdowns greater than 70%.

Even Nvidia – the defining stock of this generation and the darling of this AI boom – has experienced several declines of more than 50%.

I know because I sat through one of them. At one point, I suffered a drawdown of roughly 60%.

Was it fun? Of course not. Not even close. Did I question myself? Every day.

But I kept coming back to one simple question: Had the business changed… or had the stock simply sold off?

There’s a huge difference.

Today, I think we’re seeing something similar across many AI and AI-related stocks.

Over the past two years, investors rushed into almost anything connected to artificial intelligence…

Some companies deserved every bit of their gains. Others simply got swept up in the excitement. Others still appeared to make drastic pivots to capitalize on the AI frenzy.

Eventually, expectations might have outrun reality. Perhaps greed got ahead of its skis.

Then came another catalyst.

SpaceX captured investors’ attention with the largest IPO in history. Then it sold off sharply. Money rotated. Investors took profits. Momentum cooled. The highest-flying AI stocks were naturally among the first to come back to earth.

That doesn’t mean the AI story is over.

If anything, I think the bigger story is still unfolding.

Instead of staring at stock charts, I ask a different set of questions.

• Are hyperscalers canceling data center projects?
• Is electricity demand suddenly falling?
• Has the need for faster networking disappeared?
• Is memory demand collapsing?
• Are companies abandoning artificial intelligence?

From everything I can see, the answer is no.

If anything, the opposite is happening.

Companies continue investing. Infrastructure continues expanding. Businesses are racing to deploy AI faster than their competitors.

Those are the currents that matter.

Markets have always overshot in both directions.

First comes euphoria. Then comes pessimism. That’s simply what markets do. The mistake is assuming a correction means the story is over.

Sometimes it does. But often, it doesn’t.

Growth Isn’t Linear

Rome wasn’t built in a day. The internet wasn’t built in a straight line. Neither was electricity. Neither were railroads.

Revolutions are messy.

The winners are rarely obvious while they’re happening. That doesn’t mean every AI stock will recover.

Some won’t.

Just as thousands of internet companies disappeared after 2000, many AI companies will fail.

But history also tells us something else.

Companies that continue growing sales, earnings, and profits through the noise often emerge stronger on the other side. Add to that, the businesses building the infrastructure behind technological revolutions – the picks and shovels – have a habit of becoming tomorrow’s leaders.

The market has a funny way of confusing a correction with a conclusion.

They aren’t the same thing.

Sometimes the stock collapses, but the business doesn’t. That’s the lesson it took me years – and $1,800 – to learn.

More importantly, it was when I realized something else.

I wasn’t a trader. I was an investor.

And knowing the difference changed everything for me.

Regards,

Jason Bodner
Founder, Outlier Intel