As 2023 is coming to an end and with the calmer Christmas holidays approaching, I thought it would be a good occasion to take a look back on the passing year. What topics did I write about, where did I nail it and where have I been completely wrong? Going deeply inside myself, what am I taking home?
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Tech stocks, “Big Tech” or the “Magnificent Seven” – the same the names get more stupid, the riskier investing in their stocks becomes. Many do not see it this way. For the bona fide investor these are core investments of their portfolios with great future potential. However, a critical look back at history tells us that the risk / reward ratio is not favorable. Size does not equal safety.
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There are many rules of thumb and well-intentioned advice for younger investors. One such “rule” says that it is better to buy stocks of older and proven companies. While I do not disagree with this on an isolated basis, I am missing the second part, namely that every business has a certain life expectancy. There comes inevitably a time for every company to either step into the background or to disappear altogether. History is full of examples.
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It is no secret that many retail investors tend to act on the stock market exactly contrary compared to what they do in everyday live. A special discount or promotion – let’s get it! When stocks fall – panic. When stocks or themes are en vogue, they jump in to not miss the (rolling) train – despite the next coming. Often, this behavior is explained by emotions of fear and greed. However, it goes further than that. There’s a component to it, I call “pseudo-logic”. Why you should be cautious with logic when investing is today’s topic.
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This question is likely one of those where you will receive many different answers, depending on who you ask. Advocates of big positions are likely to tell you that without decent individual positions in a concentrated portfolio, you won’t achieve any meaningful returns. Practitioners of many small positions, on the contrary, will warn you about the risks of putting all your eggs in one basket. So, who’s right, what is definitely wrong, and what to apply?
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One of the first major “mindset tips” new investors either directly receive from someone more experienced or stumble upon by themselves is to “buy and hold” stocks. The reasoning seems to make sense, as a longer holding period should level out short term fluctuations and enable a positive investing outcome. However, this concept does not take into account a key component, misleading many investors, often causing avoidable disappointments.
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Last week, I wrote about missed opportunities and their lasting impact on me. Actually, they hurt me more and stay with me longer than realized losses where I have taken my lessons learnt. Today, I want to discuss one of the most successful – if not even THE most successful – stock(s) of the last quarter-century. Nearly self-explanatory, this was a somewhat surprising business development that many (including me) have missed. Is there maybe a second chance?
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Over the last days, I was thinking about some personal stock investments that I either sold too early or even never managend to initiate at all – because I was waiting for a correction which never came. To the contrary, I have to really think longer and more intense about realized losses, just to name a few – not because there were none (there were), but because I threw them out of my mind.
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A never ending discussion in the field of dividend investing is whether you go for high yielding stocks or dividend growth stocks. Recently, I had a few discussions on Twitter about this topic. Because it is a question many investors have – amateurs and experienced investors alike – I decided to write a Weekly to compare both strategies.
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Wouldn’t it be great if all evil was eliminated and only the good-natured, socially caring businesses remained for investments? At least this is the “mission” of funds and ETFs that focus their investments on ESG-compliant equities. The stocks of the “bad” companies aren’t bought anymore or even get sold, while the “good” entities form the bedrock of these investment vehicles. But how does it look under the hood? What stocks are held by these funds and how did they perform? And: What’s happening on the “dark” side?
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