My 3 Don'ts When It Comes To US Market Invest. Wanna Know ?
S&P 500 performances for Past 2 years
If there is one thing every retail investor need to realize is, the US market has a mind of its own.
Just when you think the coast is clear and market will rally, it could plunge and vice versa.
Above is S&P 500 past 2 years (betwn 28 Jan 2021 to 29 Jan 2023) - YTD performances. Index peaked at 4,766.18 on 27 Dec 2021.
Back in Dec 2021, CPI was already at 6.5% and rising; 3 months before the Fed finally implemented the first of seven interest hikes in Mar 2022.
Below were banks & funds house's Nov 2021 predictions on S&P 500 whereabout by end 2022 :
- Fundstrat (Tom Lee) - 5,600. Ever the optimist & never accurate in all his forecasts.
- Goldman Sachs - 5,100
- JP Morgan - 5,050
- Wells Fargo - 5,000
- Morgan Stanley - 4,400
Needless to say, all these "experts" were way-off their forecasts.
Considering that most of them have been in this speciality field for a while now. Oops !
With that, I conclude my #1 of 3 "Not To Do" - "Never Listen Wholesale 100% What Wall Street Says". That said,
- Believed its a team of staff collectively charting different sectors stocks before summating all information into a final figure.
- Too many cooks spoil the broth perhaps ?
- Could it also be a case of either (a) too much emotions involved OR (b) lack of emotions involved ? Debatable no ? Afterall "bias" & "indifference" are different forms of emotions no ?
Time to time the market ?
- A lot of bloggers preach the mantra of "time in the market beats timing the market".
- While I don't disagree, its only half truth (to me). Huh ?
- This leads me to my #2 of 3 "Not To Do" - "Never Bid On A Stock At Start Of Trading Day"
For illustration - Microsoft last week's (23 Jan to 27 Jan 2023) performance
- This is what I have observed over a certain period of time
- Regardless of market sentiments; its always prudent to wait & observe (minimally the first 30 minutes after market opens) the possible direction for the day.
- Refer to above diagram - on $Microsoft(MSFT)$ last week (23 Jan to 27 Jan) opening hours' trading behaviour
- Of course, market's direction would evolved throughout the day as news (Fed's press conference) or official reports (CPI, PCE, Unemployment, Quarterly earnings etc..) continue to make its rounds and influence sentiments
- With as much information on hand, then make a bid for your stock.
- Parting questions "As a rational investor, would you want to buy a stock at a higher price when it could be gotten for lower price ?
- And instead buy more units of stock in the process" ?. Might not be the lowest, still...
My final pitfall watchout is similar to the first.
However it is with a change in target. So ?
My #3 of 3 "Not To Do" - "Never Listen Wholesale 100% What Financial YouTubers Say".
- I returned to investing in May 2020 after a very long hiatus
- Everything was going fine until the re-surface of SPAC (Special Purpose Acquisition Company)
- With the "loophole" left unplugged, it led to the proliferation of all sorts of SPACs overnight
- Market then was awashed with liquidity as the Fed attempted to ensure US stock market does not collapse by implementing "extreme" Quantitative Easing policies.
- It was also during this time that Ark funds'CEO and all these Finance YouTubers appeared out of the blue; grabbing attention along the way.
- Hated to admit but they sounded convincing and they were forever "in your face" 24 x 7.
- Unconsciously, one gets hooked watching these "cult-like-gurus" and slowly began to believe what he or she said; with the filter set-off.
- Alarm sounded only when SPAC-fever blew over and just like that left a trail of bloody losses in the US market.
- It is a bitter pill to swallow and the book-losses {until today!} served as reminders to always perform due diligence before investing.
- Not because someone told you that Stock-A or Stock-Z is worth investing.
- Taking hints and leads as suggestion is tolerable. It needs however to be supplemented by one's own due diligence and conviction after homework completion.
- Remember, you are the Captain of your own ship - no one else !
- Do you identify with any of the pointers mentioned ?
- Do you think there are other pointers not covered by anyone else yet ? Would you like to share ? Thank you !
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