During the tumultuous dew days for the market last week, I wrote a very short piece where I said, “I’m not selling a single share today and have no intention of selling any shares anytime soon”. First, I have a confession. In my haste to get something timely out that day and my desire to use the strongest possible language to convey how strongly that I felt that people shouldn’t be selling their positions in a panic during the two day market drop, I used some imprecise language. I actually did end up selling some shares last week, just a few days after writing that I had “no intention of selling any shares anytime soon”. That would seem to clearly violate what I wrote, even though I believe the actions that I took don’t at all violate the spirit of what I mean. What do I mean? First, let me explain a bit about when I decide to sell.

As I mentioned before, “I prefer my retirement accounts to be 100% invested in stocks at all times”. One reason is because, as somebody who is in their mid-30s, I feel like I have a 20+ year time horizon for riding out market downturns and letting compound interest do its work. In recent history, the S&P 500 hasn’t had a 20 year period where an investor would’ve lost money. Now, there’s a first time for everything and all of the typical caveats about past performance not being an indicator of future results apply, but I’m willing to take the chance that 20+ years from now the market will be higher than it is now.

Another reason is because I don’t see a compelling reason to keep a cash cushion around. Cash doesn’t earn any kind of return, and every dollar that I have in cash is one less dollar that can be earning me around 10% in the market. I don’t believe I have any ability to time the market in terms of selling high and/or buying low, so a cash cushion seems just as likely to sit around unused for years as it is to be used buying stocks on sale. 

Which brings me back to the trade that I made. I originally had no intention of selling anything. But the more I watched Square (SQ) shares drop further and further, the more interested I got in adding to my position to take advantage of the 30% off sale going on. The downside of not having a cash cushion, though, means that if you want to take advantage of market drops to buy something, you have to sell something else.

When I wrote about the Freedom Portfolio, I mentioned being a little uncomfortable with the number of positions, and said, “I wouldn’t be too surprised if I ended up trimming one or two companies over the coming year”. At the time, I didn’t imagine I would be considering selling a mere few weeks later, but I also didn’t expect one of my higher conviction positions to drop 30% either.

So I went through some of my lower conviction positions and finally decided to sell all of my Alphabet (GOOG) shares. Why Alphabet? There were a number of reasons, but the short answer is that I was becoming less and less convinced that my original investing thesis still held true. Would Google remain as dominant in online advertising? Does YouTube still have a large growth runway ahead of it? Will self-driving cars be a reality soon and can Waymo monetize it? Will the privacy concerns swirling around Facebook (FB) start to weigh on Alphabet? Will the rumors of employee discontent around internal political bias and military contracts and exploring getting back into China make it a less desirable place to work? The question marks were piling up, and I was concerned enough to be okay selling my position in exchange for one I had higher conviction in.

I apologize for being misleading with my earlier post. It wasn’t my intention at all. I wanted to emphasize how I was staying fully invested and not reducing my exposure to stocks in reaction to the market downturn, but I was imprecise with my language. I’ll try to do better in the future.