Dollar Cost Averaging 101

Many of the brightest minds in the investing world share one common trait: they recommend dollar cost averaging as an investment strategy.

But what is dollar cost averaging and how does it work?

Here's Dollar Cost Averaging 101!

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In 1983, a 52-year-old senior executive at Texas Instruments was passed over for the company's top job.

He would go on to found and build the most strategically important company in the world.

Who's up for a story?

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1/ Morris Chang was born into a middle-class family on July 10, 1931 in Ningbo, Chekiang, China.

The early years of his life were set against a backdrop of hardship.

Wars and widespread poverty had overwhelmed the country, exposing him to this suffering at a young age.

2/ His father - an official in the local government - encouraged Morris to focus on school.

Fleeing the violence of the ongoing wars, Morris and his mother moved frequently.

His studies became his respite.

In 1948, at the height of the Civil War, they moved to Hong Kong.

3/ In 1949, Morris Chang was accepted to Harvard University.

He moved to America.

After just one year at Harvard, he transferred to The Massachusetts Institute of Technology (MIT) to study engineering.

He graduated in 1953 with a B.S. and M.S. in Mechanical Engineering.

4/ While he had originally intended to continue his studies and get a PhD, he failed his qualifying exam, so was forced to enter the job market.

He took an entry-level job with Sylvania Semiconductor, but quickly realized the company wasn't forward-thinking enough for his style.

The Eisenhower Decision Matrix is a powerful tool for prioritizing your time and unlocking growth in your career, startup, business, relationships, or life.

A thread on how it works and how it can change your life...

Dwight D. Eisenhower was an American military officer and politician.

He was a five-star general in the United States Army and the first Supreme Commander of NATO.

After his military career, he was elected as the 34th President of the United States, serving from 1953 to 1961.

In both his military and civilian careers, Eisenhower stood out for his prolific productivity.

His secret?

Eisenhower observed that people often confuse the urgent with the important. He did not.

"What is important is seldom urgent and what is urgent is seldom important."

The Eisenhower Decision Matrix is a visualization tool that forces you to differentiate between the urgent and the important.

It allows you to prioritize your time accordingly and unlock new productivity and growth.

Let's cover the basics of how it works...

First, we have to define "urgent" and "important."

An "urgent" task is one that requires immediate, focused attention.

An "important" task is one that promotes or furthers your long-term values, goals, or principles.

Remember: Tasks can be both urgent and important.

These paradoxes will change your life:

The Brakes Paradox

What allows a Formula 1 driver to fly around the track?

It's not the engine, the tires, or the suspension.

It's the brakes.

Strong, reliable brakes unlock the driver.

Build brakes into your life that allow you to accelerate and hit turns without fear.

The Advice Paradox

Taking more advice leaves you less well-equipped.

Most advice sucks.

It's well-intentioned, but it's dangerous to use someone else's map of reality to navigate yours.

Winners learn to filter and selectively implement advice—take the signal, skip the noise.

The Opportunity Paradox

Take on less, accomplish more.

Success doesn’t come from taking on every opportunity.

It comes from deploying energy on the opportunities that matter—the 10x opportunities.

Time and energy are finite.

Say yes to what matters & no to everything else.

The Persuasion Paradox

Have you noticed that argumentative people rarely persuade anyone of anything?

Persuasive people don’t argue—they observe, listen, and ask questions.

Argue less, persuade more.

Persuasion is an art that requires a paintbrush, not a sledgehammer.

10 common mental errors that derail decision-making:

Survivorship Bias

History is written by the victors.

But in studying and learning from "survivors”—and systematically ignoring "casualties”—we create material distortions in our conclusions.

We overestimate the odds of success because we only read about the successes!

Naïve Realism

Humans generally think very highly of themselves.

We tend to believe that we see the world with perfect objectivity.

We also assume that people who disagree with us must be ignorant, uninformed, or biased.

This error sits at the core of many societal problems.

The Dunning-Kruger Effect

Humans are notoriously incapable of objective evaluation of their own competency levels.

People with a low ability at a task are prone to systematically overestimate their ability at that task.

Example: Everyone is a genius in a bull market.

Loss Aversion

Humans tend to prefer avoiding losses vs. achieving gains—the pain of losing something is more powerful than the pleasure of winning it.

We will typically do more to avoid losses than we will to seek gains.

We systematically overvalue what we already have.

✍️CÓMO LEER EL 10-K✍️

Es el informe más importante y antes de invertir en cualquier empresa debemos leerlo y saber interpretarlo.

Papel, lápiz y café.

El 10-k es un informe completo que detalla las actividades de una empresa durante el año anterior.

Su propósito es brindar a los usuarios, como accionistas o potenciales inversionistas, información sobre las operaciones y desempeño financiero de la empresa.

La estructura de los informes anuales, sin duda, variará según cada empresa, pero la mayoría de los informes anuales generalmente contendrán lo siguiente:

▪️Parte 1: Business and Risk Factors

▪️Parte 2: Financial Data and MD&A

▪️Parte 3: Executive compesation

Vamos a ver cada una de ellas (Subcategorias) y cómo se podría analizar.

1. Business
2. Risk Factors
3. Selected Financial Data
4. The Management Discussions and Analysis (MD&A)
5. Directors, executive officers and corporate governance
6. Executive Compesation

1) BUSINESS

Esta es la primera parte del reporte, y es una de la más importante.

Se habla de la actividad principal de la empresa, de cómo gana dinero, de dónde opera.

También de la visión y misión general de la empresa.

THREAD, PM EXIT STRATEGY

I sometimes get the question “At what price do I liquidate my PM portfolio?” The short answer is:

A) I´ll never sell all of it

and

B) I don´t have a PT. I could start selling at $1900 or at $100000, it depends.

For the longer explanation, 👇

Albert Einstein once famously said “Everything is relative”. I find that quote very useful in the world of investing as well.

First off, my preferred style of investing is more influenced by macro than micro (macroeconomics vs company specific).

That means I often buy a commodity, an ETF or a basket of companies operating in the sector of interest.

I frequently look at certain ratios, or said another way, instrument X relative to instrument Y.

By analyzing historical data, I´ve set up different “ratio milestones” for when history tells me to start unwinding the ratio. As these milestones are triggered, I sell 25% of the relatively stronger instrument. For every additional 10% skew in the ratio, I sell another 25% etc.

This means I´ll never pick the absolute top nor the bottom, but I should extract much of the value while keeping my emotions out of it.

An example where this principle is adopted is shown in the Gold/Silver ratio -graph below.

Saturday thoughts on market pull. What is it? How is it different from Total Addressable Market (TAM)? And what ideas tend to have strong market pull?

A thread >>

1) First: "Market pull" != market size.

IMO (and most VCs will disagree!!), market size (TAM) doesn't *really* matter. But market pull DEFINITELY does. For that reason, I've almost never asked a startup about TAM.

Why?

2) First, what is TAM?

TAM is a sizing of how big your market is. A good way to estimate this is - if you can get to all potential buyers and based on how much $$ they are worth to you, how much money can your company make if you took the whole mkt?

3) An example: Say we run an e-commerce site that sells hippo food. TAM in the world:

-1000 zoos have on average 3 hippos = 3000 hippos.
-Each hippo eats $100 worth of food each day
-365 days * $100 * 3000 hippos = $110m per year globally

4) But, we'll come back to this.

Why I don't like TAM - it doesn't take into acct a few things:

A) how hard it is to get customers
B) how much more you can upsell once you have customers
C) how fast the mkt is moving up or down

When a stock is trading around 15-20x sales - ask why would an accident not happen? What could be the valuations damage in that case?