This is one of my favorite quotes from Charlie Munger, “All I want to know is where I’m going to die, so I’ll never go there.”
It expresses a funny but wise advice. Many people wants to take risk, to try new things, hoping to succeed in the process. Don’t get me wrong, taking risks is good, as long as you are taking calculated risks and the downside is limited.
We recently went to Baguio for a vacation, hence the lack of updates on this blog and missing the portfolio update. And there was a storm hitting Baguio at that time. Shall we go travel up the mountain or not? We will miss our schedule of activities if we delay, but it would also be a lot safer. Or should we just go, because there’s a low probability of something bad happening.
We went early to avoid the storm and traffic.
After we settled in our hotels, that night, we received an alarming news, saying that Marcos Highway was shutdown due to a landslide and there were people injured because of big boulders falling. This was the same road that we passed just 4 hours ago.
I thought to myself, we are just lucky. But the cost of that, with even the slightest probability of happening is still death or injury. Was it worth it?
In life, there are things that you should avoid because it will ultimately give you the “death sentence”. Doing drugs would be the death of your dreams or death literally. Marrying the wrong partner might mean the death of your well being, happiness and financial goals. Most people are focused on the things that they should do to succeed, yet they ignore one important fact, to look at the downside. To avoid the things that could kill you.
The recent IPO of Axelum is just one example of this. AXLM from P5.25 now down to 4.59 as of this writing. I try to avoid IPOs because its like my money would die if I bought one. Even if there if there’s a small probability of making money in IPO, the downside and the probabilities is still greater than the upside. Its like the landslide in Baguio. Traveling in storm, zero visibility, up the mountain is not a wise thing to do, even though you may survive, and the chance is small, you’re still an idiot. The downside is big.
IPOs are like that. Even if the company is good, the managers are good, price is good (or is it?), there still that big chance of actually losing money. There’s a small chance that you could make one. So why take the risk? Are you saying that with all the available investments in the world, this one IPO is the best you could find? With all the sales people, marketing people, brokers and underwriters incentivized to promote and sell the stock?
IPOs for that matter is a place where my money will come to die. So I will never let my money go there.
Have you bought any of the IPOs? How’s your portfolio doing?