The Million Dollar Mistake: Why Holding Onto Winners is Harder Than It Looks

Our story begins in a humble garage back in 1976, where Steve Wozniak, the super-smart engineer, and Steve Jobs, the really good salesman, are working on their first computer. They're joined by another guy, Ronald Wayne, who you might not know about these days. 

Here's the interesting part:

• Steve Jobs: Owned about half (45%) of the company.
• Steve Wozniak: Also owned about half (45%).
• Ronald Wayne: Held a smaller chunk (10%). Here's where things get crazy. 

What happened next?

• Ronald Wayne:  Wayne sold his entire share of the company for a measly $1,500!
• Steve Wozniak: Woznaik had to part with 15% of his shares in a divorce settlement. He eventually sold or gave away the remaining portion by 1985.
• Steve Jobs: Jobs sold most of his shares too, except for a million that he kept.

The Investor Who Said No (to a Trillion Dollars!)

Mike Markkula, the first big investor in Apple, made a decision that will make you want to go back in time. He used to own a HUGE chunk (33%) of the company!

If he'd kept it all, his net worth could be a staggering trillion dollars! But just like the founders, he sold most of his shares to invest in other things.

Today, Apple is one of the most valuable companies in the world, with a market capitalization exceeding $3 trillion.

Connecting the Dots: The Apple Story as a Lesson

The story of Apple's founders perfectly illustrates the challenges of holding onto multi-bagger stocks. Even the people who started the company, with full knowledge of its potential, let their shares go.

But their experience highlights a crucial point for every investor: holding onto winning stocks is far harder than it seems.

The Importance of Long-Term Conviction

Successful investors like Rakesh Jhunjhunwala built fortunes through long-term bets. What sets them apart?

• Full-Time Focus: Unlike casual investors, they dedicate their lives to researching and understanding businesses.
• Decades-Long Perspective: Successful investors think in decades, not years, when it comes to their investments. This allows them to ride out market fluctuations and see companies reach their full potential.
• Conviction Through Downturns: When their holdings experience corrections (30%, 50%, or more), they don't panic. Their deep understanding keeps them invested.

We've all seen social media bragging about stock market riches. But is finding the next HDFC, Infosys, or Reliance and holding on for dear life that easy? Look at Wipro, a well-established Indian IT company. A ₹1,000 investment in 1980 would be worth over ₹153 crore today (153,000x return!). The question is: could you have held on through the inevitable ups and downs?

The Temptation to Sell: When High Flyers Take a Dive

Imagine buying Amazon in its early days. While it's a dominant force today, it went through a brutal 90% plunge during the tech bubble. Since then, it has experienced multiple drawdowns exceeding 25%. Similarly, Netflix has faced several periods of decline exceeding 70%.

These stories highlight the emotional challenge of holding onto winning stocks. It's tempting to sell after a significant price drop, even if the company's long-term prospects remain strong.

.The Takeaway: Invest Smart, Invest Long-Term

Let's face it, most of us have full-time jobs and limited time to become stock market gurus. Plus, the emotional pull to sell after short-term gains can be strong. Here's how to navigate these challenges:

• Think Long Term: Building wealth through investing is a marathon, not a sprint. Setting long-term goals (7 years or more) allows your investments to mature and weather market fluctuations.
• Consider Expert Guidance: For those with limited time or expertise, consider seeking guidance from a financial advisor or exploring investment vehicles that leverage their expertise. Mutual funds are one such option, offering a diversified portfolio managed by experienced professionals.

Remember, even the founders of Apple couldn't hold onto their golden goose.

Have you ever sold an investment too early, only to watch it soar in value later?"

Follow me, Ravi Nagrani, for more insights on personal finance and investing.