Will You Hold Firm or Go With the Market Flow?

Came across the above Tiger commentary and thought I'd share my opinions on my page for those interested. Had to break the following into 4 parts on the commentary due to word limit, so Pasting this here for those keen on reading one full piece.

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Trigger alert: The following are opinions of mine alone and do not constitute financial advice.

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Contrary to what most people believe, going with the market flow makes more sense to me.

You may say... 

"Oh, I'm buying into companies with strong fundamentals anyway, so it doesn't materially matter and I'd just DCA if market falls". 

However, when it comes to successful investing and capital accumulation, evaluating financials of companies is not everything. 

Have you found yourselves catching falling knives; and despite your best efforts to DCA, stocks just keep falling further till the point you run out of money to DCA and question your intelligence, luck, and future decisions? If yes, this post is for your 🌻CAREFUL CONSIDERATION🌻

Let me vocalise my train of thoughts with numbers and yall can evaluate if it makes logical sense to you. However, do evaluate if this will work for your type of holdings (tech, AI, telco, reits, luxuries, consumer, crypto) + evaluate the current and future market sentiments by reading widely.

Assuming I bought SPDR S&P 500 ETF Trust (NYSEARCA: SPY) at $520 and stocks have started to slip. With news of ongoing Middle East Conflicts + accelerating inflation + possibility of FED's higher for longer stance / no rate cuts this year + possible recession outlook (market sentiments + analysts' deductions) + falling markets in the region, I'd expect SPY to fall further. That being said, yall will say, just DCA when it drops. Yah. DCA till which point? Till I run out of money to DCA? So nopes, I'd sell my holdings at a slight loss. We call this CUT LOSS. Say I cut my loss at $510 (assuming that's the max loss I can take). And buy back in trenches at prices much lower than $500. This will allow me to own MORE SHARES than when I held at $520 and watch it fall to DCA. And if I were to buy the same amount of shares when it drops to say $480, then this gives me a 'cash savings' of ($510-$480) x number of shares I buy.

Still don't get it? Let me give you another example with $Marathon Digital Holdings Inc(MARA)$ . I saw MARA slipped from $30 (Jan 2022) all the way down to $3.20 (Dec 2022). I was one of those who DCA-ed at the start. And eventually found it stupid. Say I own 5000 shares at $32, if I sold them all at $30 when it was falling, I'd get back $150,000. Yes, I may have made a loss of $10,000. But listen. When it drops to $5 (assuming we can't catch the bottom of $3.18 on 29 Dec 2022), with my $150,000 from my earlier sale, I could have bought 30,000 shares at $5 (much more shares than if I were to DCA or do nothing). And when MARA rose to its $32 bucks in Dec 2023, I would have profited heavily. And if I were to just buy 5000 shares of MARA at $5 costing $25,000, then I'd have the other $150,000 - $25,000 = $125,000 as 'savings' for other investments. And this is what I call protecting my portfolio. When its time to cut losses, I CUT. I don't catch falling knives. Because I can't see my portfolio fall from $150,000 in this case study to $3.18 x5000 = $15,900 without doing anything! And to wait 1 year for my portfolio to recover? That's insane. What if you bought stocks like SEA and they don't recover? For those who bought SEA when it was $350, when will you breakeven? 

For those who do not have money to DCA, you'd have to wait 1 year before MARA came back to your buy price! If you DCA-ed till you get sick of it, you still have to wait a long time. And in that 1 year of waiting, I could have channeled that $150,000 into somewhere else + option trading to earn another $100,000. Instead of playing the waiting and DCA till no end game. 

You may say oh. All these evaluations are just in retrospect or that I bought the wrong stock. Look at Coinbase (fell to a low of $30 in 2022), NVIDIA (to a low of $120), Tesla, Microsoft, Google and Amazon. They fell crazily badly too. Who would have known NVIDIA would rise from its low of $120 in Oct 2022 to its recent price of $900?

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Let me know if my explanations resonate with you. Follow me for more content like these! 

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