Make Small Bets
Small bets can have outsized returns. If it goes south, you've also got less on the line. Have conviction? Make a larger bet. Not sure about an investment? That's a solid candidate for a small bet. You find out the company's outlook is now questionable or management is not meeting the mark? You could always sell half. However, the largest gains come from letting asset value compound over time.
The size of your bankroll determines your range. Consider making some small bets in stocks, real estate or even starting a business. There is less stress in a small bet. For me, it's $50-$500 up to $1,000 that I consider a "small bet" in my taxable investor brokerage account. Anything greater than that and it's no longer a "small bet" to me.
I even have some $50 or $100 positions that I might add to someday. This is the magic of stocks. Value tends to go up over time. You could have bought almost any stock at the end of 2022 and would riding gains. At the time, no one knew what would happen.
Now, the general outlook for stocks seems favorable, with consensus that the recession is cancelled. Year to date, the market is mostly reacting in a way that suggests we were in the "oversold" range at the end of last year. Are we now overbought? I doubt it, but we'll see! My theory is that now is a still a decent time to open some small bets to gain exposure to exceptional asset value growth.
My portfolio is tech heavy with some strategic industries like electric vehicles, solar energy and cloud computing. I also reaped some of the sudden 2023 AI buzz in Tesla, Microsoft and Nvidia with tech prices getting a lift pretty much across the board.
Microsoft is a core position in my portfolio. Nvidia was a medium sized bet that resulted in a 3x bagger gain. It's now a small bet again after I took some profits. Even on a small bet, booking 3x your money is a pleasant payday. After making the original bet in 2020, I'm letting my $1000 cost basis ride in this stock.
It's hard to encourage anyone to get into a high multiple valuation. I say that knowing this semiconductor company is a one of my best small bets currently. Risky or frothy prices might be right for a tiny bet with the possiblity of adding more later on a dip. Sometimes it pays to buy a company on such a trajectory but it honestly scares me to buy it now. So I'm holding my small Nvidia bet for a long time.
Afterword
This is not financial advice nor all writing on this blog. Learn to assess the health of a business. It is an art based on valuation, cash flow, profits, management, margins, market share, strategy, reinvesting assets for compounding growth and so on. Investing is unpredictable and risky, sure, but make some small bets.