04-27-2021, 12:38 PM
I made a huge mistake the other day and I want to fess up about it. Last week, the sky was falling for a couple days and the drawdown cutoffs that I'd established for several triples were tripped. I ended up selling NAIL, though I held onto others like SOXL. My thought process at the time was, NAIL has a history of huge drawdowns every other year or so. If it is at the start of one of these, that's what my rule is for. If it were to continue falling past my cutoff, I'd have no one but myself to blame for not enforcing my own rule. So ... I sold.
The problems with this outcome are as follows:
1) I sold after 11 months of owning; 1 month shy of qualifying for long term capital gains tax. I just gave myself a huge tax bill for next year because I quadrupled my money. Between my earlier mistake with VOO, and now this, that's $8000 of short terms capital gains, and that's after the MARA and HIBL losses. (E*Trade has a tab which tells you.)
2) I didn't assess the situation properly. The first 2 weeks of April represented a huge run up, and the market just needed to let off some steam. There's nothing fundamentally wrong at this time with Home Depot, Lowes, or Sherwin Williams that will represent a massive drawdown for NAIL. And lo and behold, it's right back up where it was before that 2 day drop.
Verdict: when in a taxable account, before selling due to a price point cut-off, really assess the situation. I panicked when I shouldn't have.
The problems with this outcome are as follows:
1) I sold after 11 months of owning; 1 month shy of qualifying for long term capital gains tax. I just gave myself a huge tax bill for next year because I quadrupled my money. Between my earlier mistake with VOO, and now this, that's $8000 of short terms capital gains, and that's after the MARA and HIBL losses. (E*Trade has a tab which tells you.)
2) I didn't assess the situation properly. The first 2 weeks of April represented a huge run up, and the market just needed to let off some steam. There's nothing fundamentally wrong at this time with Home Depot, Lowes, or Sherwin Williams that will represent a massive drawdown for NAIL. And lo and behold, it's right back up where it was before that 2 day drop.
Verdict: when in a taxable account, before selling due to a price point cut-off, really assess the situation. I panicked when I shouldn't have.