Going into December, I thought there was enough chance of a strong end of the year rally/ January effect rally to make taking a risk on small company stocks a reasonable call. Even though the entire market looked shaky in the longer term. (That is in 2019.)
With the break down in the Standard & Poor’s 500 yesterday and today to below the February and April 2018 lows at 2581, I no longer think the possible reward of this trade justifies the risk.
There’s a good chance that the current bear market in many technology stocks and sectors such as energy, technology, and financials is likely to get significantly worse before it gets better.
So it’s time to recognize my mistake and sell shares of the iShares Russell 2000 ETF (IWM) out of my Jubak Picks Portfolio today. The position is down 14.87% since I added it to this portfolio on November 6, 2018.
No apologies necessary. Sharing different points of view is important. But my question still stands–your advice now is to just sit and take it when the market slides into a bear. Even if your answer to that is yes, I still have to wonder what time horizon you have where that makes sense. Very different if you’re 30 and if you’re 55.
Hm.
Much of my response below could be construed as ‘small mouth, big talk’ – so apologies upfront. I enjoy your commentary a lot… where I have issues is you leveraging your analysis for short-term trading ‘opportunities’. And it’s not because you are making mistakes in that step. It’s ‘cos of short term trading is much like chasing fool’s gold, made worse by single stock situations.
Coming to your specific question, a few different thoughts come to mind:
1. Your question has a rhythm of ‘I must do something’. Why so? If I didn’t overreact to the meltup, I don’t need to overeact to a meltdown.
2. If I must do something, I’d $-cost average in. I $-cost averaged out on the way up – surely leaving plenty of money on the table as markets steadily moved up. So if I’d do anything, I might start $-cost averaging in. But the difference here lies in the fact that I won’t sell my last $-cost move in if markets fell further (which is how this comment-exchange started – by you pulling the plug on a very recent buy once any Santa Claus rally didn’t show up). I would instead buy more knowing i’m buying more units of the same equity at a lower price by investing the same $s as before (sorry for dragging you thru’ how $-cost works – something you already knew well).
Once again, I’ve followed you for a long time. Some of your trades have done well, and some haven’t (some of the older names that come to mind are BRF, LNN, VALE, the currency-hedged German economy (forget the symbol)). I’d say over the last 10 years it’s been a rather mixed bag.
The record you state on your website also includes the period of very high returns in the late 90s (annual return were`~25% year after year). But if you took that period out (when everyone was a great stock-picker), I doubt your numbers would stand up to the markets much. I speak this more in terms of honest thinking and not to show you down. And if I got this point wrong -I’ll eat crow no problem. And also, my apologies upfront.
Best,
Ansh
So you advocate sitting in place in a bear market like this?
Timing the market in the short run never works. You may get a couple right, unfortunately only leading you to increase your bets & then… Nor does indulging in single stock situations.
Identify long term trends, get into index funds, & go find something else to do… otherwise finding the grass not grow fast enough as you continually watch it will prompt you to tinker with it, ending in you mucking it up completely (not to mention the better sleep you get this route).