A while back there were various posters (definitely including @Bravo_Bravo and @Charlie_Cong) on a thread discussing investing, but I can't seem to find it or a nominal headline "investing" thread. So here is one.
Particularly given the rollercoaster that the market charts look like over the past 12 months, I'm curious how everyone on here who dabbles has done, and what they think, lessons identified, learned and even possibly applied? I am happy to get the ball rolling.
My % return over the year has gone down somewhat, but it was unsustainably high before, and is still at a pretty healthy 50%. There were several factors behind this:
1. I got COVID smack bang in the middle of the crash and was too ill to do anything much for about 6 weeks, so didn't take advantage of the dip.
2. My potential buy list for the year was pretty evenly split between 33% no movement (avoided), 33% averaging a 91% increase (my selection), and 33% stocks which have gone on a run of 3000% - US solar and NIO Chinese EV - (avoided, unfortunately).
3. I chickened out of a buy that I made, then sold pretty quickly following what was an obvious manipulation ploy, but which also played into my fears about the stock), but that cost me a 500% rise in that stock over the year.
So I'm in that fine position of being healthily up in reality, but having taken a huge hit in opportunity costs.
The lessons I have learned from this are:
- My narrowing process is solid, my selection is not. From now on I'm rolling the dice on my potential buy list, or buying smaller and buying it all, rather than selecting myself. This has actually held true for several years (the average performance of my narrowed list is higher than my selections from it).
- Increasingly the price of stocks in a fad interest (e.g. Tesla, EV this year) is totally divorced from any underling fundamentals. Much of the market (particularly it seems in the US) is trading at multiples of decades above the actual earnings of a company. This is neither wise nor sustainable. The value of a lot of superstar stocks is almost totally comprised of the confidence of investor money.
- The steepness of the dip this year is fascinating. Try and find another one like it in the records. Almost every major crash has taken years to recover value - this one took months, and despite the (real) massive economic damage wrought. There are a couple of reasons why that might be, but none of them escape the basic premise that capital value has to reside somewhere, and that somewhere will have taken a massive hit by having the world furloughed for 6-12 months. That is not being reflected, at all, in the value of market capitalisations.
- There is no such thing as "value" and "growth" stocks. They are the same thing. The correct differentiation shouldn't be the assessment of the stock, it should be the method of repayment to shareholders: "dividend" stocks are genuinely different because of the nature of how they repay value incrementally over time, which similarly affects the capital price of the share. "Value" and "growth" have become divorced from the reality: both are essentially stocks which, for shareholders, are putting 100% of their value into the capital share price. A value stock can become a growth stock just by the addition of confidence. Similarly, most growth stocks end up being value stocks, with relatively few of them massively losing value, just gaining it more slowly.
- Risk in these conditions is being miscalculated. Where is the downside on most stocks? There is mostly a downside of opportunity cost, not of value. In other words, the value of money lost from stocks in set A does not appear to be related to the value of money gained by stocks in set B.
- If you have made a buy based on risk conditions you were aware of, there is no point in getting rid of it until you have let it play out a bit, even if those risks materialise. In other words, if you risk X in order to gain 5X, be prepared to lose X.
So I freely admit that this may partly be because I'm not looking at the full picture. It may be that others here have been looking at more traditional stocks that have been hammered, but certainly in the areas and industries I've looked at (which are not exclusively flashy tech etc ones), there appears to be a distinct lack of downside from the economic downturn and pending dep/recession. Is this all being funded by the resumption of printing money activities by governments around the world? At some point inflation has to hit, surely? Or, we are looking at a current market bubble, or set of bubbles, in a number of industries.
Curious to hear opinions.
Particularly given the rollercoaster that the market charts look like over the past 12 months, I'm curious how everyone on here who dabbles has done, and what they think, lessons identified, learned and even possibly applied? I am happy to get the ball rolling.
My % return over the year has gone down somewhat, but it was unsustainably high before, and is still at a pretty healthy 50%. There were several factors behind this:
1. I got COVID smack bang in the middle of the crash and was too ill to do anything much for about 6 weeks, so didn't take advantage of the dip.
2. My potential buy list for the year was pretty evenly split between 33% no movement (avoided), 33% averaging a 91% increase (my selection), and 33% stocks which have gone on a run of 3000% - US solar and NIO Chinese EV - (avoided, unfortunately).
3. I chickened out of a buy that I made, then sold pretty quickly following what was an obvious manipulation ploy, but which also played into my fears about the stock), but that cost me a 500% rise in that stock over the year.
So I'm in that fine position of being healthily up in reality, but having taken a huge hit in opportunity costs.
The lessons I have learned from this are:
- My narrowing process is solid, my selection is not. From now on I'm rolling the dice on my potential buy list, or buying smaller and buying it all, rather than selecting myself. This has actually held true for several years (the average performance of my narrowed list is higher than my selections from it).
- Increasingly the price of stocks in a fad interest (e.g. Tesla, EV this year) is totally divorced from any underling fundamentals. Much of the market (particularly it seems in the US) is trading at multiples of decades above the actual earnings of a company. This is neither wise nor sustainable. The value of a lot of superstar stocks is almost totally comprised of the confidence of investor money.
- The steepness of the dip this year is fascinating. Try and find another one like it in the records. Almost every major crash has taken years to recover value - this one took months, and despite the (real) massive economic damage wrought. There are a couple of reasons why that might be, but none of them escape the basic premise that capital value has to reside somewhere, and that somewhere will have taken a massive hit by having the world furloughed for 6-12 months. That is not being reflected, at all, in the value of market capitalisations.
- There is no such thing as "value" and "growth" stocks. They are the same thing. The correct differentiation shouldn't be the assessment of the stock, it should be the method of repayment to shareholders: "dividend" stocks are genuinely different because of the nature of how they repay value incrementally over time, which similarly affects the capital price of the share. "Value" and "growth" have become divorced from the reality: both are essentially stocks which, for shareholders, are putting 100% of their value into the capital share price. A value stock can become a growth stock just by the addition of confidence. Similarly, most growth stocks end up being value stocks, with relatively few of them massively losing value, just gaining it more slowly.
- Risk in these conditions is being miscalculated. Where is the downside on most stocks? There is mostly a downside of opportunity cost, not of value. In other words, the value of money lost from stocks in set A does not appear to be related to the value of money gained by stocks in set B.
- If you have made a buy based on risk conditions you were aware of, there is no point in getting rid of it until you have let it play out a bit, even if those risks materialise. In other words, if you risk X in order to gain 5X, be prepared to lose X.
So I freely admit that this may partly be because I'm not looking at the full picture. It may be that others here have been looking at more traditional stocks that have been hammered, but certainly in the areas and industries I've looked at (which are not exclusively flashy tech etc ones), there appears to be a distinct lack of downside from the economic downturn and pending dep/recession. Is this all being funded by the resumption of printing money activities by governments around the world? At some point inflation has to hit, surely? Or, we are looking at a current market bubble, or set of bubbles, in a number of industries.
Curious to hear opinions.