What Interests Me This Week

There's no shortage of discussions about hot investments to ape into. If the fundamentals make sense and the price point is right, entering a position is straightforward.

Discussion about what to sell however is hardly even a thing. The art of exiting positions is reserved for men not boys.

Making investment is easy, exiting them generally isn't. That's at least true in my case.

Holding onto an asset forever is a myth, perpetuated by naive talks about Berkshire Hathaway.

The heuristics of when to exit an investment is the thing that I'm thinking about. I'm good at buying, not good at selling because the criteria for exit is unknown.

The only way I know how now is to count on bullish market cycles to sell. It's still something, but I suspect that's not good enough.

Some people have a good sense of valuation model upon an entry. The same thing would drive their exit when there's an objective sense of over-valuation. But this is not my strong suit, and I'm not sure I should adopt that quantitative a playing style.

The closest mechanism I have to exit signals is in portfolio construction. When valuations change, something becomes overweight, then it's time for rebalancing to maintain the desired risk profile. It's kind of the only thing keeps me not running like a headless chicken.

If there's one thing I can say against that framework is that it is relativistic for other assets in the portfolio. An absolutely objective approach would judge an exit without looking who is sitting next to it. A right answer is a right answer even if no one in the entire class got it right. I only wonder how much this applies to bets.