There’s a special kind of psychological torture that comes with small-cap investing. Only at the spicier end of the market can you find yourself twice as wealthy as you were five years ago, yet half as rich as you were last spring.
Rationally, it’s a great outcome, and pretty much the journey you should expect. But in a weird way, you’ll feel worse than if you’d made half the gain in a slow, steady grind.
We don’t seem to measure progress from where we started — only against the highest, most glorious peak we ever touched, even if we were only there for a hot minute.
Which is why, I suppose, very few people care to chase the bigger gains. The potential may be great, but the journey is simply too arduous. And there’s no shame in that.
But if you can muster a bit of stoicism, the returns on offer aren’t nearly as speculative as most people think. At least, not if you properly comprehend the difference between risk and volatility, and operate on a time frame where shifts in sentiment are less impactful.
That’s not to say the actual risks aren’t real. They very much are! Just not to the degree that price fluctuations might suggest. Which is, I suppose, exactly what we all look to exploit.
The hard part isn’t spotting value and pressing buy, challenging though that is. The really hard part is not letting the market psych you out at every turn.
In the end, it’s less about outsmarting the market and more about outlasting it.
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