If You Don’t Hold It When It Drops, You Won’t Hold It When It Rises
Dynamic Exposure and the Wisdom of Never Going to Zero By Kuan | Miyama Capital
As this bull market roars on, I hear the same story of regret over and over. Investors who held high-conviction tech stocks for years sold everything in April—right when the fear was loudest.
They violated the cardinal rule of long-term survival: Never go to zero exposure.
The legendary speculator André Kostolany left us with a brutal truth:
“If you don’t hold wheat when it drops, you won’t have wheat when it rises.”
It sounds abstract, but every investor learns this lesson the hard way.
I made this mistake early in my career. I couldn’t handle the pain of a drawdown, so I liquidated. I stopped the pain, but I killed the compounding.
After 15 years of refining my system at Miyama Capital, I now refuse to go to 100% cash. Here is the logic behind why we always stay in the game.
1. The V-Shape Trap: You Cannot Pivot Instantly
When people liquidate during a crash, they tell themselves: “I’ll sell now to stop the bleeding, and I’ll buy back when the dust settles.”
This sounds rational. It rarely works. Real bottoms are rarely elegant U-shapes. They are violent V-shaped reversals.
Picture the moment: One minute, the narrative is “Recession Imminent.” The next minute, a data point shifts, and prices gap up.
At that moment, there is a massive psychological gap between the Spectator (All Cash) and the Participant (Base Position):
The Spectator: You fall into the Anchoring Trap. You remember yesterday’s lower price. Buying now feels like “chasing,” so you wait for a pullback. But the market rips higher. The higher it goes, the more paralyzed you become. This is exactly what Kostolany meant.
The Participant: Because you held a base position, your equity is recovering. You feel relief, not paralysis. You are “on the train.” This psychological footing gives you the courage to add to your position aggressively on the way up.
In the Miyama framework, the Base Position is not just an asset; it is an admission ticket. Without it, you are doomed to stand on the platform watching the train leave.
2. Your Source of Capital Defines Your Psychology
Why do people panic sell? Often, it’s not the market—it’s the money.
You must trade with true “idle money.”
If you are trading with your house down payment or next month’s rent, you cannot survive a 20% drawdown. Your brain will be in “survival mode.” When the chart turns red, your amygdala hijacks your logic, and you will hit the “Sell All” button to relieve the anxiety.
Only when the capital is truly discretionary can you afford the luxury of logic.
3. Execution: How to Buy When It Hurts
You have the idle money. You kept a base position. Now, how do you add back?
This is the hardest part. The brain knows the math, but the finger won’t click the mouse. We use three systems to bypass this friction.
A. The Hybrid Entry (Left & Right)
We mix Contrarian (Left-Side) and Momentum (Right-Side) entries:
Left Side (The “Paid Confirmation”): As the market falls, we buy small batches to restore our exposure to a baseline (e.g., 30%). We don’t try to catch the absolute bottom. We view this as “paying a fee” to ensure we are mentally engaged.
Right Side (The Heavy Hammer): Once the trend confirms and our first batch is green, we deploy the bulk of our capital to reach full exposure.
B. Dynamic Position Sizing
Never sell all at once. Never buy all at once. We treat exposure as a dial, not a switch. It goes from 30% to 100%, but never to 0%.
We slice our capital into small units (e.g., 10 tranches). This allows us to scale in across the entire “Smile Curve”—buying the drop, the bottom, and the recovery.
Benefit: You never run out of bullets. Knowing you have cash in reserve keeps you calm enough to deploy the cash you have now.
C. The “Delete App” Strategy
For most non-professional investors, complex laddering is too stressful. If you cannot handle the mental gymnastics of a hybrid strategy, do this:
Wait for a valuation bottom → Buy your allocation → Delete the trading app.
It sounds crude. It works. The biggest enemy of long-term compounding is checking your P&L every hour.
4. The Hierarchy of Base Positions
“Never going empty-handed” applies to more than just individual stocks. It is a worldview.
Level 1: The Company Base For a high-conviction company, hold through the volatility. Unless the business model is structurally broken (fraud, obsolescence), do not sell your core shares.
Level 2: The National Base If you believe in the US economy’s long-term resilience, you must always hold a core position in the S&P 500 (SPY/VOO). Do not let short-term election noise or rate hikes scare you out of the country’s growth engine.
Level 3: The Civilization Base This is the ultimate macro bet. Do you believe human productivity will be higher in 20 years? If yes, you must own a slice of Global Equity (VT). If you go to 100% cash, you are effectively shorting human progress.
Conclusion: Admitting We Are Human
Investing is largely an exercise in self-management.
We admit we cannot pivot instantly, so we never go to zero.
We admit we get scared, so we only trade with idle money.
We admit we cannot predict the future, so we bet on the long-term arc of civilization.
This is the philosophy: Ensure you are always in the arena. Do not let fear turn you into a spectator in a future you actually believe in.