I started investing in early 2020 when the market started crashing midst of the emerging pandemic. At the time, I did not own any stocks so I was able to commit capital without any hesitation as it was already lower than the recent prices. Initially, I purchased many travel-related stocks as they were hit the hardest like the airlines and cruise stocks. However, as time passed, I rotated many of these stocks into other big-cap stocks like Starbucks, Meta, and Pepsi. I learned the value of diversification and wanted to build a portfolio that I can keep for the long term.
It's interesting to see how rotation in the stock market occurs as investors' sentiments change. Throughout 2020-2022, the small-cap, speculative stocks were hit first and the blue-chip, safer stocks stayed high as investors wanted to shelter in these companies. However, as the divergence in prices became larger towards the end of 2022, investors rotated their big tech companies with rich valuations back into the smaller cap stocks.
Even during 2021 when the tech companies like Zoom, Teladoc, and Peloton were valued at peak prices, people were blinded by the large gains and thought they were never going to drop in prices until they did.
Many of these companies reached floor prices that were lower than the pre-pandemic prices even though their technology has improved many folds since the post-pandemic.
"market can stay irrational longer than you can stay solvent"
As the quote states above, it's impossible to predict the market, and those who try may end up losing all their money trying to bet on their predictions. Many of my stocks decreased in value during this period as well. However, as I continued to diversify my portfolio with both value stocks, growth stocks, and speculative stocks, I was able to weather the storm comparable to indexes like the Nasdaq.
Another lesson that I learned is to take some profit off the table when it goes up, and vice versa, buying the dip when it goes down. (read: Easy Method to Investing).
For example, I purchased Meta stock as it continued to go down and I kept buying the "Dip." It can get frustrating as the stock that you bought at the dip, keeps dipping.
However, eventually, I believed the stock will rebound because Meta was ingrained in so many parts of our daily lives. I did not know when it would bottom but as of now, it seems to have bottomed in November.
Sometimes this can be called a "dead cat bounce" meaning it's a temporary recovery in prices, but sometimes it can be value investors jumping back into the stock as a renewed belief in the company or the attractive valuation.
But as no one can predict the future, if the stock re-tests its low, I will be happy to buy more to lower my average cost.
That is the reason why Meta became such a big position in my portfolio and I have trimmed some of the shares in order to balance out the holding percentage relative to my portfolio.
Overall, as of January 2023, my portfolio has been skewed largely to big tech companies and less in value, blue-chip stocks like Pepsi, Disney, and McDonald's (completely exited the position due to high valuation) as these stock's Price to Earnings (P/E ratios) were high while the big tech companies P/E ratios have dropped.
The past decade from 2010-2020 was a golden year for big tech companies like Google, Amazon, and Apple. However, I believe this will continue through the next decade as these companies have become very large and continue to invest heavily in emerging technology like automation, AI, and e-commerce. There are other handfuls of big tech companies that will also survive through this time, but some will inevitably drop off and go under. A few tech companies that I believe will survive for the long term are Nvidia, Spotify (temporarily sold due to tax-loss harvesting strategy for the tax year), and Robinhood. Tech companies that I do not believe in for the long term are Paypal, Zoom, and Shopify. However, with ownership in the Ark ETF which invests in emerging technology companies, I can also benefit from missing out on the right companies.
I also believe that the second largest economy in the world China will continue to remain dominant and Chinese companies such as Alibaba, Baidu, and Tencent will continue to grow and the share prices will go up. Therefore, I own two of these stocks in Alibaba and Baidu.
For those who do not want to hand-pick stocks but still want to invest passively without worrying about how your stock is doing, there are many ETFs that you can invest in:
S&P 500: VOO, SPY, IVV
Growth Stocks: QQQ, VGT
Dividend Stocks: SCHD, VIG, DGRO
Real Estate: VNQ
As I practice continuous, and long-term investing in the market, I will continue to monitor the market and enter and exit positions as necessary. During the bull cycles, I will simply leave cash in the brokerage account, and during the bear market, I will continue to use the buy-the-dip strategy in companies that I already invest in. Feel free to share your favorite stocks that you believe in for the long term!
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