Its hard to keep track of so many, news on each one candlesticks in each one and fire power on each one.
If u make 100k a year and have money to play then maybe yes why not!
But an etf is more efficient, it will get tierseme at some point and if you average your portfolio vs a etf 2 3 years down the line it might just be that the etf is above you.
Meaning you canāt beat the market., but donāt get me wrong we all try all of us!
At the moment ETFās look like the easy option to track. Rather than hoping individual stocks do well. Especially if theyāre in the ETFās you already own yikes!
Eh, if it continues, then everything should be super cheap in time for my payday. Iāll keep investing.
The only thing changing for me, is Iām starting to be discouraged about the value of bonds in a portfolio - I havenāt actually started that part of my investments yet, and Iām starting to think thereās no point as they donāt seem to do much. Hell, all the bonds (govt etc) are on a downward trend with the stocks right now, so theyāre not even doing their supposed job of going up when things go south.
Thanks for the information. I donāt disagree with you that ETFs like the S&P 500 are a good longterm investment. However it does look like we are at the start of a market crash so I would rather wait before jumping into them. I mean Scottish Mortgage trust is down 5% today alone. I just sold my S&P 500 at a 2% loss because I fear it will keep going down.
To be honest my portfolio is currently only about 40% of my assets, the rest are in savings accounts. As a new investor I didnāt want to dump all of it in stocks immediately in case of a crash or I mess up and lose a lot. If the market does crash Iāll be ready to buy cheap because Iāve decided I wonāt be adding any more funds until we know whatās going on. All signs point to a bubble that is bursting.
Some thoughts about why the market seems to have disliked J. Powellās comments yesterday and effects on growth stocks.
In essence JPow does not seem worried about inflation spikes which according to him would be temporary, and in any case they would have āthe toolsā to handle them and keep inflation around their target of 2%. The markets seem less ārelaxedā about this and promptly responded by selling off long term US treasury debt. This spiked bond yields (e.g. see the 10y treasury jumping yesterday).
Why the spike?
Inflation erodes the value of bondsā income payments, making them less attractive. (source)
And this has an effect on stock market valuations, especially in the growth stocks many of us have been pilling into over the last year.
The sharp rise in bond yields has increased pressure on equities in recent weeks since higher interest rates dent the appeal of companiesā future cash flows. (source)
Another possible contributing factor to the bond selloff was the lack of commenting by JPow on the rumoured possibility of extending relief for banks related to a regulation known as the supplementary leverage ratio (SLR). In short, if banks are required to meet SLR regulations they may need to raise cash which could add to the bond selloff. More on this here.
I wonder if anyone here remembers the market ācrashā in December 2018. Pundits blamed the market plunge on Fed hiking rates, the āchina trade warā, and fears of economic slowdown. But recall that 1) the market recovered in a V shape days after December ended, without the Fed deciding to reverse course on the rate hike, 2) that the market was unfazed by trade war headlines nearly all year long, and 3) the economic growth data remained incredibly positive and strong. The December 2018 drop was irrational.
This look back at recent history goes to show how irrational markets can be and it is up to us to take advantage.
For today:
the Fed is NOT raising rates and have said this repeatedly.
the economy is recovering and there is little data suggesting any upcoming slowdown or recession.
The fear now is about the fear of inflation/yields rising. Note that we donāt have any data suggesting inflation is permanently here to stay.
I think there are two solid conclusions:
This is not a bear market happening before our eyes. Itās a correction and buying the dip is the likely right move. An overall selloff right now, is irrational, just like in December 2018, with the exception of growth stocks that are very overvalued especially in the context of rising yields.
No one can predict how deep this correction goes, but it would be prudent to buy the dip on cyclicals, financials, and growth stocks that are already undervalued
Please also note that the SP500 is now so heavily weighted to the top market cap growth tech stocks like FANG, that a 10% correction in them will require 90% increase in the bottom 100 stocks of the SP500 to avoid a fall. So the best way to increase your portfolio CAGR may not be to simply buy the dip in the SP500 index, but rather choosing the above sectors or stocks that avoid this weighting.
Chances are Iāll know it has bottomed out when itās going back up. That entry point will still be better than buying now. Even if I miss the dip entirely Iād just be buying todayās prices later on. Unless thereās no dip at all and they keep rising. That is just looking the least likely of the possible outcomes.
S&P 500 just seems too risky right now. Especially with @Jonnyās point about it being weighted so heavily against tech stocks. Tech stocks that have ballooned over the past year and are now falling because they were over valued.
I personally donāt care whats going on at a macro level- high/low inflation, GDP forecasts, etc - whilst it makes for interesting reading, economies are naturally boom and bust, so in the long term, economic short term woes donāt make a difference to your investment outcomes as long as youāre confident your holdings are quality businesses that can whether the storm. More importantly, anything can happen - any economic forecasts should always be taken with a pinch of salt:
āThere are two kinds of forecasters: those who donāt know , and those who donāt know they donāt knowā
I am absolutely not going to āwait till the bottomā (shocked thatās the advice jim cramer gave out) - no one can know with any certainty where the bottom is. I saw so many people miss out in march last year because of this way of thinking. Personally, If I see a 5% discount, iāll buy. If that same stock plummets further to a 20% discount, iāll dust myself off and buy some more.
Let me be clear though, IMO buying the dip isnāt foolproofā¦ If youāre buying a highly capital intensive and cyclical business with thusly unpredictable cash flows (naming no names) in an economic downturnā¦ buying a dip is risky as hell and could compound your losses. Having said all this, I am extremely confident in the businesses I hold, and buying them at a discount regardless of whats going on in the short-medium term is a no brainer for me.
EDIT: Also, just as a side note, I am extremely glad to be able to dip my toes into some cheap stocks after having learned so much over the past year. I was worried that , having spent so much time reading/researching, that iād missed some (but not all) once-in-a-decade opportunities, but iām glad to see such opportunities arise as we speak. Iāve grown so much as an investor since march, so it makes mevery happy to capitalise on some discounts with a keener, more diligent eye.
I wouldnāt mind the sell off continuing for a bit longer or just staying flat till April. Iāve got a chunk of cash waiting for the fresh ISA allowance
Well Iāve also maxed out my ISA, but Iām investing now in the GIA rather waiting for the new allowance, somehow I doubt Iāll make more than Ā£12k this year! ā¦ if I do itāll be a nice problem to have
