Is it a good strategy to buy now?
Hey guys - I have a lot of cash and want to start investing.
I am planning to DCA the S&P500 over the next 4 months - Does that sounds like a good approach? I believe it makes sense as the S&P is down 20% YTD
Any suggestion is appreciated
Obviously I don't have all the answers, but the adage "don't fight the Fed" comes to mind. That has burned me before, and I wonder if the markets have fully priced in a hawkish Fed. Always good to invest incrementally over time, like you said, but I think it's pretty clear this one isn't like COVID, where hope sprang eternal,
https://www.bridgewater.com/research-and-insights/equity-markets-arent-…
well, people have argued markets haven't priced in a hawkish fed. but in light of the recent selloffs i think markets have come to realise this
Today feels like another “no news is good news” bear rally. Just like last week before market got hammered.
All the negative action on pricing this year feels like it had been initially from the macro and inflation creep before becoming absolutely firm with feds (absolutely needed) tapering and rate hikes. So what I think is that the declines have been primarily rated related - the classic dcf higher rated equal lower value.
that said, it feels like companies are still (not universally but generally) maintaining earnings and cash flows for the balance of this year. They might have been riding a strong start and that’s tapered but they’re mostly going to finish good or better in earnings and cash flow. There is weakening in 2nd half.
Cost of capital will be higher in 23 than 22, and what happens if consumer spending as people start to adjust, and I mean really adjust 6-10+ months into inflation, their habits. 2023 will comp lower across the board if that’s the general direction and then we’ll have revised downward earnings for the year. Until that happens I don’t think we’ve truly reached a bottom
As long as easing inflation numbers constitutes "no news".......
I'd agree with you that today's activity is in direct response to the inflation readings as already mentioned below, but the post you're replying to is over a month old
Wait until Michael burry stops tweeting about market collapse
if by "a lot of cash" you mean "a lot of cash for me now, but not a large % of my eventual net worth" then I wouldn't be shy, aim to DCA it from now until the next large infusion (bonus/vesting/etc.). HOWEVER, only do this for long term funds, for any short/near term needs, put it in t bills or the 2y UST
while I pick individual names instead of just buying SPY, this is essentially my approach. I am buying all the time, market dips are an opportunity to buy more shares at lower prices and since my time horizon is >20y, no need to be tactical. even if this turns into another 2008-2009 market event, you're not blowing your wad now and you'll get a better buying opp fast. from Nov 2008 to the bottom in 2009 the market fell something like 30% (after already being down 40%) in 4 months, that's far too fast for people to react and the fear at the time was palatable, most were just hanging onto any cash they had because jobs were also being eliminated. when the bottom comes, it will be scary times and you'll question your decision constantly, which is one reason why I like the DCA approach, it takes the emotion out of it
further, after 20-25% declines, tech bubble excepted, you're usually seeing profits 1y out: https://awealthofcommonsense.com/2022/10/animal-spirits-long-term-bulli…
finally, anyone who is saying "wait for X to happen," show me your track record, what you said in Q2 2020, Q4 2021, Q4 2008, Q3 2011, and on and on, because just like it's easy to believe cathie wood in Q1 2021, it's easy to believe john hussman right now, your psychology is your worst enemy
Thank you professor
Agreed
Unborn Normie meet Newborn Normie. Market = jungle, avoid pain for now. CQ will give signal when we make generational wealth fam.
If you're long term (10+ yrs), it's basically always a good time to buy. DCA if you can and back up the truck when you have additional resources. If you have some cash to invest for the long term, this could be a generational wealth creation event. Hard to believe leading companies of leading industries wouldn't be way more valuable in 10 yrs.
So basically you suggest to DCA the S&p500?
Good place to start. You may want to expand into other areas, individual or concentrated holdings (sectors). But SPY is great for beginners. I built my own portfolio of many stocks so I control what's bought and sold, control taxes (other than dividends of course), etc. But yes, a good place to start.
Stock market jumped massively this morning. Any other skeptics out there? New inflation readings came out- overall up +8.2% ("down" from 8.3% in August); but the core index (excl. food & energy) is the highest since 1982 at +6.6%. Even the paces of inflation month over prior month are staying steady
anyone out there in the markets have any idea? was the market pricing in like a massive uptick to 9% or something? This seems like its still painting a fairly uncertain to grim outlook yet the markets loved it. Very confused.
This doesn't answer your question, but days like today are why 90%+ of my portfolio is just DCAing whatever I can into a broad ETF every 2-4 weeks. I expected CPI to remain hot and that the market would continue the tanking it was doing late yesterday. Well, looks like I was wrong on both counts.
My head still tells me that things are going to get worse before they get better. A bunch of people in tech are losing their jobs and not all of them will get picked back up right away. I totally understand that FAANG devs are super talented and will land on their feet, but I just feel that there's so many zombie, worthless tech companies out there that were running off of ZIRP that we're still in the middle innings of this correction in tech and it'll take time for everyone to get reintegrated into the economy. For reference, to me early innings = rates rising and investors pivoting from funding unprofitable tech; middle innings = tech companies trimming the fat, cutting salaries, and unprofitable companies going out of business; late innings = ripple effects from tech disproportionately making up our economy last decade spilling over into the rest of the economy (think service workers supporting the tech oligarchs, housing in "new startup cities" crashing, etc.). That's on top of the fact that energy is still going to remain high for the foreseeable future IMO and we still have supply chain issues that'll keep the perpetual supply shock going. Oh, and rates are now higher, which means companies aren't just going to issue debt and expand and meet demand willy-nilly anymore.
Anyway, the point of my rant above was to say this stuff is all super hard, if not impossible, to predict. I enjoy the intellectual challenge of coming up with ideas that beat the markets and also just enjoy understanding how businesses make money. Beyond that though, I just don't think I can be a good investor year after year, so I've resigned to believing that a broad index of companies will grow more often than not over a long time horizon and just average into them with whatever savings I can afford to not touch for 10+ years.
Really like your defined points on the innings through the tech lens. I've been thinking in a similar framework and benchmarking it to consumer spending and corporate earnings. It seems like they crossover at some points in that surely tech companies are RIF'ing this year, possibly other sectors too, who outgrew to just monetize on the extremely high, pent up post covid demand and now are looking at next year's outlook, seeing income much lower with inflation hurting both consumer demand and capital costs, and wanting to take some hits by paying out large in a year that's nearly over (and possibly already considered a wash because everyone's to the future) and taking the savings next year
Agree it's impossible, someone would be massively wealthy if they had a crystal ball. It is very fun to go through the discussions and challenges of trying to ID a salient list of views and opinions. I also cost average in with some "fun money" on the side
Feels like we were basically at trough sentiment coming into CPI. Crypto in free fall, huge tech layoffs, Rs weak in midterms, etc.
Everyone I talked to seemed to be expecting a downside surprise, if anything, so when CPI came in cooler than expected this was a shock to the system and a signal to many that maybe they were being too negative.
Good call. When you put it that way, it really made me consider how quickly things could or may already start to reverse. It is wild not only how many but how varied and individually substantial events are occurring right now that hinder an economy
Multiples have not fully adjusted to where rates are and with QT and de-globalization in full swing, I'm not sure rates are coming down any time soon. I would hold off.
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