Shiny New Object Syndrome

If you’re a typical investor, there are more stocks you’d like to buy than what you have money for.

No matter how satisfied you are with your portfolio, that hot new IPO – or hot “new to you” stock – looks so attractive.

The first thing you do is to start looking at which stocks in your portfolio you care to part with. Your thought process might go as follows: “Well, I’m up 300% in stock A, which just reported a bad quarter. Maybe the time is right to close the position.

“Then there’s the stock I’ve owned for a year that is only up 7%. The market has been on a tear the last 12 months…and this POS is only up 7%!!

“Lastly…I’m down 15% in this dog that I bought 2 years ago. I think I’ll sell that one.”

The latter two scenarios make a sound argument for the stocks in your portfolio that you should sell. However…there are never any guarantees.

Remember that at one time or another, Amazon (NASDAQ: AMZN) sold off – even though they were growing revenue at 15%-20% annually.

Netflix (NASDAQ: NFLX) had a three-year period when it did nothing. Tesla (NASDAQ: TSLA) was flat for two and a half years leading up to 2020.

And Nvidia (NASDAQ: NVDA) underperformed the market for years before they became the AI juggernaut they are today.

When we buy stocks, we can’t buy them in hindsight. Since we have no way of predicting the future, most of the sales we make will most likely turn out to be bad ones.

Sometimes a new company goes public that we feel we just have to own. We don’t have enough cash on hand, so the next best option is to sell stocks. “Shiny new object syndrome” is very real. I’ve been victimized by it myself, and at times it’s come back to bite me in the ass.

Let me share a personal story with you.

In 2016, I purchased shares of Invitae (NYSE: NVTA) at $7.60 a share. It went from $7.60 to $12 in gut-wrenching fashion. There were numerous fundraising rounds that made owning the stock painful, not to mention that it was the victim of a short attack by Citron Research and Akram’s Razor, a writer from Seeking Alpha.

NVTA did nothing until June of 2020, when they announced an acquisition of a company about to go public. In one session, the stock was up 30%, and until recently, it has not looked back.

The idea of selling NVTA for that “shiny new object” crossed my mind plenty of times. When I bought the stock, I intended it to be a long term hold, and I stuck with that. Glad I did.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click here to be taken to its Amazon page.

(Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)