History is About to Be Made... (Emergency Update)
Overall Thesis
During market downturns, retail investors make poor decisions by selling growth stocks and buying defensive stocks, when they should maintain conviction in quality companies through drawdowns as part of long-term wealth building.
Narratives
The S&P 500 provides consistent long-term returns averaging 10% annually, with 95% of decades being positive. Tom advocates for a 40% allocation to the S&P 500 as the foundation of a portfolio, emphasizing that drawdowns are temporary and part of normal market cycles.
Key Arguments
- S&P 500 averages 10% annual returns over long periods
- 95% of decades are green, 100% of 20-year periods are positive
- Provides diversification and reduces single-stock risk
- Dollar cost averaging during market drops creates wealth
The NASDAQ is currently down 6% in the market selloff, representing the tech-heavy nature of the index. Tom acknowledges the volatility but doesn't make specific predictions about its direction.
Key Arguments
- Currently experiencing significant drawdown as part of broader market selloff
Palantir represents 30% of Tom's portfolio and has delivered 1,500% returns since its 2020 DPO at $10. Despite current 11.5% decline, he views this as a buying opportunity since the drop is market-related, not company-specific.
Key Arguments
- Up 1,500% since 2020 DPO launch at $10 per share
- Current drop is market-related, not company-specific
- Represents quality business experiencing temporary market sentiment
- Historical pattern shows major drawdowns followed by significant gains
Tesla represents 30% of Tom's portfolio and has delivered 1,400% returns since 2019, rising from $24 to $360. Despite current 17% decline, he views drawdowns as buying opportunities for this quality business.
Key Arguments
- Up 1,400% since 2019, rising from $24 to $360
- Historical pattern shows major drawdowns followed by significant outperformance
- Quality business experiencing temporary market-related decline
- Drawdowns provide opportunities to buy at lower prices
Hedges & Caveats
- Creator acknowledges personal portfolio is down more than average due to high-beta concentration
- Explicitly states this is educational commentary on investor behavior, not specific buy/sell recommendations
- Emphasizes drawdowns are normal and expected parts of investing
- Acknowledges high-beta stocks have higher volatility both up and down