Yeah, this is purely fear- people overshoot on the way down, you can profit. I made some easy money in 2008 on certain banks that were obviously not going to fail. The bet is that things return to some sort of normal. I would not normally buy these stocks, they have nowhere near the growth potential as the tech stocks.
I guess I don't believe in the statistical basis of the risk calculations (bell curve is an invalid model for sure for stocks), so only one stock is way riskier than you would think and tech only is already exposing you to some kinds of systemic risk.
Just curious about why you say this. I'm not saying you're wrong (because you aren't), but I would just like to know why you made this statement with conviction. I'm very aware something could happen, but I also experienced this in 2008. My 10+% returns have been on average since 2005. That's not to suggest or assume they will continue on this trend, but I am fairly confident that even in a recession or crash, the markets will eventually recover. I also keep on hand a decent amount of interest bearing cash to take advantage of these situations, and also protect from the downside. But like with any investment, there are risks.
If you'll look at your chart, those peaks in ~2002 & ~2009 were market bottoms, earnings had already dropped precipitously; and they were also black swan events. Historically from a F P/E and P/E ratio, the market is overvalued, even without a black swan. Also when you look at the debt market right now, it does not look healthy at all. That's usually a sign that something is brewing, usually a recession. However, stocks can continue higher, blow off tops are common place in the last phases of a bull market.
My fear is that the central banks are pumping so much liquidity into the market that they are driving up equities and pushing people out of safer assets into things like high yield bonds and momentum stocks. If we do have a recession, the pain could be worse than usual (for stocks) for the mere fact that the debt market could have liquidity problems when tons of funds begin to pull their money out at once from HY.
Not to mention all of the corporate buybacks that companies are doing by leveraging, because cash is too expensive to bring back overseas.
You can still invest in solid companies, but companies like Tesla, Netflix, anything with a super high P/E is going to be taken out back and shot (that doesn't mean the companies will go out of business, only that their stocks are much like Amazon in the 2000s.)
To me, even though the experts say otherwise, this feels very pre-2008. I know the experts are saying to have no fear... but that's what they were saying in pre-2008 too. I guess I'm too nervous to invest and that's on me.
The 2007-2008 period was actually the time to invest even more aggressively, if you could stomach it! Historically, those big drops rarely happen. And when they do, they rarely last for long. You have full recovery in a few years. My investments from that time, mostly Total Stock Index funds, like VTSAX, have tripled.
People need to be taught not to be afraid of investing. I know many smart folks, some who are engineers, who were scared of investing until they were in their mid 30's. My dad taught me about investing when I was a teenager. You do this right, you can retire in your 40's or 50's, never have to work again if you don't want to.
You might luck out, maybe hit it rich on startup stock options by joining the next FAANG company. This is unlikely to happen. Investing in the stock market, week after week, year after year, decade after decade... It's almost guaranteed.
Please read the above advice! In 2008, I saw the crash coming. I got tipped off, kind of: My bank was NetBank and it was the first one to fail. I pulled all my money out of stocks and sat out the crash. Brilliant, right? Yeah, except in 2010, I didn't re-invest it! I sat on a lot of cash and missed out on tons of gains. So while I preserved my wealth (and that was dicey because Money Markets nearly collapsed and that's where all my "cash" was). Had I stayed invested I would have taken some paper losses but I would have come out further ahead by now.
My one concern is that these markets are just pretend bs because of QE and the effects money printing has had on all assets.
Sure, but on average, everything is doing well since the last economic crises. There are dot-com tech stocks that never recovered. I'll only buy funds or dividend paying stocks, though mostly everything is in a 401k (which rode out the crashes quite well).
Right at the moment, markets are quite scared. Anything different means "run for the exits, then evaluate it, then get back in cautiously if I decide that it wasn't bad after all". Everybody has 2008 on the brain; they don't want to be caught holding the bag if everything falls apart again.
Stock prices are absolutely inflated, and as a small-scale investor I'm scared.
However, I'm not pulling out because realistically, there's no other asset that's safer in the long run. Interest rates are close to zero so returns in bonds are low, inflation will eat away money held in cash deposits and don't even get me started on cryptocurrency, rare sneakers or other "alternative investments". I started investing in stocks in 2017, even then people were warning that we were in a bubble that was bound to burst at some point. Not investing would have missed me several years of above-average returns.
But today, there seems to be a bubble on everything after all the money printing. So I'll keep investing in good, underhyped and stable companies and try to weather whatever storm, good or bad, will come in the next years.
The real stock market actually has those kind of moves, approximately once a decade. Peak Akamai, for example, was $327/share on Dec 1 1999. I bought in at $1.90 in May 2002, the bottom was $0.90 4 months later, and it's currently at $68.53. Folks who invested in the dot-com boom are still 80% underwater (much worse than any Bitcoin investor), while folks who invested 3 years later are sitting on a comfortable 60-bagger.
Investors in GM & Chrysler (considered blue-chip value stocks at the time) saw their investments go to zero when the companies declared bankruptcy in the 2009 Financial Crisis. The S&P 500 dropped 50% in the same period. PG&E stock dropped by 53% in one day last week when it was revealed that they may be responsible for the California wildfires.
Pretty much everything worth investing in is that volatile. You just either need to be greedy when other people are fearful and vice versa, or have long enough time horizons for it not to matter.
Winners win. What reason do new investors have to believe it will crash now?
Pandemic?
A global supply chain interruption?
Democrat controlled U.S. government?
Widespread protests and unrest?
None of these things slowed the stock gains.
Those who bought the usual tech stocks last year and held made 20% plus.
At no point I called it low risk. It's high risk / high return. The risk of high financial exposure to such funds can only be taken until 40, because one needs to be able to not sell during the entire economic downturn.
Here is my logic as a retail investor. The market has lost close to 20-30% from the peak. Will it regain the peak, for sure. By when ? Hard to predict. All I know is that the rate of climb need not be the same as the rate of the fall.
This virus will bring about significant collateral damage to the global economy. Already airlines, cruises are hurt. Soon, tourism and hospitality industry will be hit. Transport and logistics will be next followed by retail. So the cascading collateral damage is quite unpredictable at this time. Double this with plunging oil prices.
So unless you are willing to wait for 10+ years from now, it's unwise to invest a lump sum amount at once. If it were me, I will just invest small amounts periodically. Like every couple of weeks or so.
First one is generally also true. But future returns with the current stock levels? Or maybe everyone is going short term, trying to ride the wave as long as possible and hoping to be out before the next drop?
Well you haven’t been investing very long if you believe the banks have any idea what’s going on.
They pretty much all had 5000 price targets on the S&P for 2022
Buy recommendations on stocks with wild overvaluation that later collapsed 90%. Just look what most banks and funds were doing during the dotcom bubble
If you think it will break the previous floor on fear alone, absent the technical uncertainty and unsustainable rapid growth leading up to the 9k crash, let alone the institutional investment this round, you are speculating without any real basis.
We were in an unprecedented bull run for tech stocks for a decade plus. No guarantee that continues. Markets are anti-inductive and past performance is no guarantee of future results.
I said 10% average per year is risk free. If it collapses and never recovers for 50 years, then I'll agree with you but we both know that's not going to happen.
It's not going to happen precisely because the system is a scam and in reality there is no risk. The only real long term risk to stock prices is total societal collapse.
If the government keeps bailing out inefficient corporations, eventually they will get exactly that. Now there are many less painful options available, but by constantly brushing them under the carpet, the government and the fed are making total socio-economic collapse an increasingly appealing option to solve our systemic problems.
They could just try to solve the problems now, but instead they prefer to let the tension build... Just like it did before WW2.
Well, I think what you’re talking about is perception of risk. The perception of the risk that it goes to 0 is probably decreasing over time. But the expectation of future gains based on past performance is also decreasing over time. Most of the investors I feel are worth listening to see this and conclude two things: it’s here to stay but probably can’t go much higher without the broad market also going higher.
I guess I don't believe in the statistical basis of the risk calculations (bell curve is an invalid model for sure for stocks), so only one stock is way riskier than you would think and tech only is already exposing you to some kinds of systemic risk.
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