Nobody likes to lose money. Yet, in investing, losses are part of the game even when we follow the same set of rules that produced winning trades. When we find ourselves down, we do not panic. We focus, adapt, and do whatever we can within reason and discipline to recover.
In a meeting with new partners, I reviewed a real client account with exposure to an aggressive strategy that went through a rough patch during the challenging market conditions of 2022, when the tech sector fell sharply and pulled some of our positions with it.
In the discussion, we examined the actions taken during that period, how decisions were made and what was adjusted. During periods of drawdown, some clients naturally begin to question our work often forgetting the other profitable trades within a diversified portfolio.
One client, for instance, questioned a Treasury ETF position with a covered call strategy in his portfolio, insisting we had bought it at the “peak”. In truth, I do not trade based on a single chart, indicator, or gut feeling. Every trade follows a disciplined framework guided by “multiple” indicators that serve the the portfolio’s overall objective, not by hindsight or luck.
In my work, I never argue with anyone with post-mortem comments like “we should have bought this” or “we should have sold that.” That kind of conversation may sound smart at dinner tables but in the real world, it is a waste of time better spent preparing for the next opportunity. As for that ETF position, it was not a hero trade and actually served as a hedge or insurance with no losses at the exit.