# Letter 1 - Before Any Capital Decision

By [decadethink.eth](https://paragraph.com/@decadethink) · 2022-03-28

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Dear DecadeThinkers,

In the past decade, I made these sucker mistakes in my personal account:

**Sucker A has 95% understanding on 100 penny stocks.**

*   Useless. Does not drive price
    
*   Price on penny stocks is driven by beta liquidity + insider volume
    
*   Loses money quickly
    

**Sucker B buys great assets at market ATHs**. He buys after the institutions and ambitious grandmother has bought in, gets FOMO and has unthorough research.

*   Floats a loss quickly
    
*   Psyche burdened by loss, checks price daily
    
*   Sells at a loss as next ATH is months away from current ATH
    

**Sucker C believes in heavy allocations and “all-in” without having a large edge.**

*   Edges are probabilistic
    
*   Minimize factors of risk - be direct, avoid complexity
    
*   Eventually loses heavily - a death sentence in a geometrically compounding world
    

Sucker A fix: Focus. On the market leader. Define your market well. Sucker B fix: Wait. Until fair value has been reached (Nothing here about new lows). Sucker C fix: Reduce. Admit you have no edge. Halve your intended allocation.

**Mistakes** **to cumulative losses of 80%!** on three occassions in the past decade, with principal in the 100s, 1,000s and 10,000s. No affect to lifestyle. Yes affect to psyche. Gambling wrecks havoc on the psyche.

**_Corollary:_** _If you are in an irrational enough state to do things you know to be wrong AND outside your circle of competence, i.e. Writing naked call options._ **_Please stay out of the market for the time being._** _Demote yourself from a portfolio manager to research analyst - if you must twaddle._

Using $100 to earn $10 pa investing makes no sense when your total capital is low and returns << working income potential. Instead, spend little time on investing, more on living. Invest in life.

Dogmatism and unrealistic dreams earns you losses very quickly. Think independently. Then re-think. Then re-think against your stance. Very few events are directional _a priori_ as we would like them to be.

No advice _via positiva_, especially coming from a money-losing manager.

Yours Truly, DecadeThunk

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*Originally published on [decadethink.eth](https://paragraph.com/@decadethink/letter-1-before-any-capital-decision)*