Optionality = Lots of options
2021 has been a year for optionality. Bull-markets, Bitcoin, Spacs, Clubhouse, NFTs, and DeFi. Each a passing fad, a paradigm shift, or neutral...(your choice).
Seek options with limited downside and large upside (relative to your reasoning). Investing comes with high optionality.
You can store money in bonds, stocks, start-ups, cash, crypto, spacs, or (deep breath)...credit default swaps on triple A-rated subprime mortgage bonds:
How do we go about making the "right" choices? Well...
What doors are available:
Optionality is a large room with many doors (options) to open.
Behind every door, lies a room with even more doors to unlock.
How to enter rooms:
Though it's a double-edged sword, taking risks is the requirement to open doors.
It takes trial-by-error to open the doors you want. That’s what investing is.
What door to look for:
Find the room where luck is your roommate.
If you don't like the room you're in, unlock a new one. Eventually, you'll find what you're looking for (trial and error).
I've gone from:
- Investing in JP Morgan and American Express in March 2020
- Thinking I'd hold onto both businesses for 5+ years
- Selling those shares around December 2020
- Reinvesting into bitcoin immediately after
That's what having optionality means. Seeking rooms with limited downside and large upside (relative to your reasoning). Benefitting from trial-by-error.
At the end of the day, the room you choose to enter is entirely up to you. If you don't like the room, avoid it. It's that simple.