Before I get into the bulk of this edition, I want to share a tool that I have been using as of late, Benzinga Pro. It has become a go to tool for me that allows for fast stock market news which I can customize the Newsfeed completely to my liking.
I strongly recommend trying this tool out, and before you commit, Benzinga Pro has a completely free two week trial where no credit card is required!
2 Week Benzinga Pro Trial (FREE.99)
I know there has been a lot of Fear, Uncertainty, and Doubt recently, but I have attached two images using Benzinga to showcase the beauty of zooming out.
Clearly, the picture below looks ugly, has markets have been trashed by Evergrande news out of China last week, and this week it is all about the steep increase in Treasury Yields.
I urge you to reframe these views, and if you are like me, with a long-term time horizon, you should welcome these blips. Donāt believe me that these are blips? Letās take a look at the 10Yr chart of the S&P500, and just remember, each year there is no shortage of ānegativeā catalysts, yet the markets still trend upwards overtimeā¦hmā¦.
Markets have had a rough September, but I want to reiterate, the market hasnāt had a 5% pullback in some 200+ days, so the notion of a pullback is welcomed, and in reality, VERY, VERY healthy. Below is a look at the major indices on the day, which most appear to be bid up, with tech trading slightly down to flat. So what is going on here? The theme of markets this week has been focused on the treasury yields increasing sharply, and after markets were bloody on Monday, the market was quickly bid up today, Tuesday. My theory is that yesterday was over-sold, and as a result of large cash positions that both institutional and retail investors have, these dips are quickly retraced.
Enough of my little rant on the current state of the market, which if you canāt tell already, I am bullish on equities, regardless of what makes it on Headline News.
Before we get into my tips for confidence, here is Chadās Pick Of The Week: $BABA
Why $BABA? Check out my Youtube Channel, make sure to subscribe, because a video is dropping soon on what I think to be a grossly mispriced stock due to the China sell-off.
Tips For Building Confidence As An Investor
1) Start out small & invest often - Investing with frequency is most important, especially early on. I strongly recommend investing at least monthly, and if you can do it more, GREAT! Donāt just start investing by choosing 1 or 2 companies, get your feet wet, usually with a basket of 15-20 stocks, and even better than that, utilize index funds & ETFs, especially when you are first starting out. Concentrated bets and positions are usually the death of a new investorās portfolio.
2) Position size is everything - If any one of your positions is greater than 10%, I urge you to reconsider and reassess your risk tolerance. Asset allocation and position sizing makes up the bulk of your return, far more than individual security selection, so PLEASE, PLEASE, PLEASE, Do Not Invest The Farm on a single stock.
3) Keep track of the stocks you buy and sell - If you sell or buy a stock, keep a journal and write down your thesisā¦the WHY behind your purchase or sell. This can be a reminder on why the long-term investing strategy usually wins.
4) DO NOT, under any circumstance, check your portfolio everyday - Contrary to popular belief, you will not build wealth quicker by checking your portfolio everyday. In fact, this habit will often times build impatience, which ultimately leads to bad trading/investing behaviors.
5) Just because a stock has a bad day, week or even month, does not mean the stock is a bad play - Reassess your these (refer back to tip #3) and ask yourself if the stock has the same fundamentals as when you purchased it, regardless of the price action. Often times in the short to medium term, the stock price does not equal the fair or fundamental value of a stock.
6) Start looking at red days, weeks, and months as BUYING opportunities- This requires you (in my opinion), to build a small cash allocation in your portfolio above your emergency fund, usually in the ball-park of 5-10%. This will allow you to take advantage of mispricings in the market without having to liquidate current holdings. Be careful of having too high of a cash allocation, which can severely impact your portfolio return caused by cash drag.
7) Find the right echo chamber - We all know social media is an echo chamber for our biases, so find accounts, friends, news media outlets (few exist) that reiterate long-term investing principlesā¦If your feed is filled with 16 year old day tradersā¦this does not help your long-term investing strategy.
8) Buying the dip doesnāt mean buy anything that drops - Be patient, and buy the dip on things worth buying the dip onā¦Donāt buy crap, ābuying the dipā implies āqualityā, so donāt buy the dip on some low float penny stockā¦Donāt be a degenerate.
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