The Daily Journal Corp overseen by Charlie Munger slashed its Alibaba holdings by half. Some investors are panicking if Charlie Munger knows something that they don’t. Does this mean that Alibaba might be uninvestable or that something is amiss?
Many retail investors have tried to copy trade ideas from investment gurus like Charlie Munger and they have also expressed their worries. We even read from an investment forum that some of them are following suit to sell half of their holdings by taking losses.
The fact that retail investors believe that copy trading can make money is more concerning in our opinion. This Alibaba example will not just be an isolated incident that such investors will be faced with. It is no surprise that if one buys on another’s conviction, similarly, one would also sell in the same manner.
But the truth is that investors can sell their holdings for many reasons. One renowned investor is Mohnish Pabrai who also sold a huge amount of shares in Alibaba recently. He shared that one of the reasons was for the purpose of tax loss harvesting and it was not because he thinks that Alibaba is not going to do well. In short, there is weak signal value when anyone sells anything.
And quite obviously, if Charlie Munger now believes that Alibaba is not going to do well, the right thing to do would be to sell all positions rather than keep half of the holdings.
This is just another good example to explain why it is important to be personally convicted in your investments. That means even if today you did not copy trade from another guru, you must still be able to feel good about your decisions when you come to learn of such news. And you would know you are, when you are totally unaffected even if one day the headline reads “Charlie Munger has fully liquidated his Alibaba holdings” and you are still able to hold onto your Alibaba shares unfazed.
By doing so, this is definitely not to say that you think you are smarter than Charlie Munger or other investment gurus. Rather, it is about learning to stick to your own investing plan and most importantly, to be able to make your own investment decisions.
Chief trainer of The Moneyball Investors Playbook program and founder of The Joyful Investors, a financial education firm that seeks to help avid investors learn to invest better and make the journey a joyful one. I graduated with a first class honors in Bachelor of Accountancy from Nanyang Technological University (NTU) and started my auditing career in one of the Big Four. I believe that once we know how to build our wealth sustainably, we can then live our best lives ever.
This document is for information only and does not constitute an offer or solicitation nor be construed as a recommendation to buy or sell any of the investments mentioned. Neither The Joyful Investors Pte. Ltd. (“The Joyful Investors”) nor any of its officers or employees accepts any liability whatsoever for any loss arising from any use of this publication or its contents. The views expressed are solely the opinions of the author as of the date of this document and are subject to change based on market and other conditions.
The information provided regarding any individual securities is not intended to be used to form any basis upon which an investment decision is to be made. The information contained in this document, including any data, projections and underlying assumptions are based upon certain assumptions and analysis of information available as at the date of this document and reflects prevailing conditions, all of which are accordingly subject to change at any time without notice and The Joyful Investors is under no obligation to notify you of any of these changes.
· · ·
Have you enjoyed this article? We’d be grateful if you would share this useful content to your friends who may benefit from it as well.