Ian Cassel: The Hardest Part About Dealing With Drawdowns

Johnny HopkinsIan CasselLeave a Comment

During his recent interview on The Investor’s Podcast, Ian Cassel discussed the hardest part about dealing with drawdowns. Here’s an excerpt from the interview:

The hardest part about dealing with draw downs is it makes you more and more short-term instead of pushing out your time horizon. And so your portfolio drops 20% and you’re excited to buy more, then it drops another 10 or 20%. You’re like, “Well, wait a minute.”

Then all of a sudden, you’re on the phone with management asking them the same questions you just did the month prior because you just want to get that verification that everything’s okay. And then you buy more, and then all of a sudden you just run out of dry powder to buy more. And then it drops another 10 or 20%, and you’re just frozen.

And nothing’s worse… draw downs are the most painful when you don’t have the cash and take advantage of them. And so that’s one of the lessons that I went through in the last two or three recessionary environments that I went through. It was it always feels good to at least have some cash up on the sidelines, even if it’s just a little bit, even if you’re just buying another 1% of a position somewhere.

Over time, at least it makes it feel emotionally, mentally, psychologically like you’re taking advantage of the situation. And what tends to happen too is the lower things go the more you turn yourself, at least for me being a stock picker, the more I start thinking about the macro market inflation, interest rates, Elon Musk, whatever the case may be, things that are distracting me from the micro focus.

And so everything just gets you thinking more short-term. You can’t mentally handle being down another 10 or 20%, so you just tap out. And so it’s important to just stay in the game, stay in mentally and emotionally.

You can watch the entire discussion here:

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