Through the end of last week, the bull market in stocks continued to reach all-time highs. And the underperforming Russell 2000 (small cap stocks) finally began to move higher – see the uptick for the grey line on the far right of the graph.
This week has seen a reversal with the S&P declining 1.4% for the week and the Nasdaq down 3.0% this week (as of Thursday afternoon). Nasdaq and S&P prices are getting overvalued, so a pullback is not too surprising after the big move higher over the last eight months.
It will be interesting to see if the falloff this week is just a minor pullback or if it is something bigger. The economic news has been mostly positive with inflation continuing to fall and expectations for a Fed rate cut growing. GDP is slowing down slightly but this has been expected following the Fed rate increases. If investors think the GDP slowdown might turn into a recession, stocks will continue to fall.
At this time, my guess is this week’s activity is a minor pullback, but we will keep a close eye on job reports and economic data.
Between November of last year and July 12th this year, the S&P 500 and the Nasdaq (top two lines) have moved sharply higher. Both the S&P 500 and the Nasdaq are at all-time highs. Notice how the Russell 2000 (bottom line) is still in a bear market – sitting about 12% below its previous high in November of 2021.
Our customers have posted huge gains since November of last year as we have been “all in” on stocks. The S&P 500 has gained 33% since November 1st. And our customers can be extremely confident knowing that our Market Signals system will move them to cash if the market declines significantly.
When you have downside protection, you can be comfortable putting 100% of your money in stocks and getting the big gains in bull markets. You can also sleep better at night.
Without an investing system like Market Signals, investors are forced to shift money to lower performing and safer assets before the bull market is over or be willing to get crushed in a bear market decline.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
Successful investors:
Are very disciplined
Have a rational investing process that they follow consistently
Base their strategy on facts and data
Are students of the markets
Understand the cycles and risks of the markets
Do not react to fads
Keep their emotions under control
Unsuccessful investors do the opposite.
And the biggest thing that hurts unsuccessful investors is emotional investing. Emotional investing is behind most of the major investing mistakes.
Overconfidence leads to problems for a lot of investors, particularly younger investors. Overconfident investors:
Read one article or one book that leads them to believe that they can outsmart the market
Are not as skeptical as they need to be
Are drawn to the newest investing fads
As a result, they end up getting burned.
Overconfidence starts to creep in after periods of high growth in the markets. At the time of this post, the Nasdaq had increased by 77% over the last twelve months with most of those gains driven by huge increases in the Magnificent Seven stocks. Nvidia grew by 176% over the same time period. People who invested in the high growth stocks are now thinking that they are investing geniuses.
Experience in the markets will humble you. Just when you think you have it all figured out, the market will punish you. Hubris will cloud your judgment. Overconfidence will make you sloppy.
Greed is another emotion that leads to costly investing mistakes. Greed has many of the same impacts as overconfidence.
Greed clouds your judgment.
Greed leads to chasing sketchy opportunities and taking on too much risk
Greed causes people to follow the crowd and to get into opportunities when it is too late
Greed causes people to act too quickly and without all the facts
Greed causes investors to focus too much on the short-term and “get-rich-quick” ideas
At the present moment, people who missed out on the big moves in Nvidia and the other Magnificent Seven stocks are often envious of the people who made a lot of money in those stocks. They tend to buy at the top of markets and suffer big losses when the market turns.
The technology growth stocks typically climb the highest in bull markets but they drop more in bear markets.
I am not saying that people should not invest in growth stocks. I am saying that you should not buy these stocks based on an emotional reaction to a recent trend. Investing in stocks like today's Magnificent Seven should be part of a long-term strategy by investors who are well aware of the stock market cycles.
The other strong investing emotion that affects more people than the emotions of greed and overconfidence is fear.
Fear is one of the strongest human emotions that impacts every area of our life. Fear is part of our survival mechanism and is designed to keep us safe by avoiding danger.
Investing fear leads people to safety. Investing fear causes people to put too much money in safer, interest-bearing assets that provide low investment returns. Fear causes many people to avoid the stock market altogether.
Fearful investors can limit their losses in market downturns but it comes at a steep cost - not having enough money in retirement due to poor investment returns.
Fear also causes people to sell when markets bottom out. Many investors throw in the towel after they have suffered too much in bear markets. By doing so, they make those losses permanent and miss out on the inevitable bull market recovery that follows.
I created my Market Signals Investment System to counteract our natural tendencies to invest emotionally. It is a disciplined and quantitative investing approach that is a “get-rich-slow” system. Market Signals takes advantage of the highly volatile cycles of the market to make lots of money in good times and to avoid losses in bad times.
If you want to be a successful investor:
Stay humble
Stay skeptical and wary
Avoid greed
Don’t let fear cloud your judgment
Be deliberate
Seek out data to prove or disprove investing strategies
Keep your emotions under control
Stick with proven and disciplined investing approaches and methods
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
I do what I do because tens of millions of Americans are missing out on the biggest wealth building opportunity of their lives. Seventy five percent of Americans do not end up with enough money to retire at age 65. And the twenty five percent that do retire with enough money could have millions more if they had managed their 401K investments properly. We are talking about a massive opportunity here.
Most people are so fearful and confused about investing that they make bad investment decisions and end up missing out on this opportunity.
Most of the messages put out by the media only add to that fear and confusion.
Industry regulations force financial advisors to be cautious and conservative when dealing with individual investors.
This backdrop of negativity and concern distracts from the tremendous opportunity that exists for 401K and IRA investors.
A 26-year-old making $50,000 per year should be able to retire with over $4 million in their 401K account by age 65 if they invest their savings properly. This compares to the typical $700,000 to $900,000 that most of these 26-year-olds will end up with at age 65.
A 40-year-old just starting out with their 401K making $75,000 per year should be able to retire with $1.5 million in their 401K at age 65 if they invest their savings properly. This compares to the typical $500,000 to $600,000 that most of these 40-year-olds will end up with at age 65.
With average incomes and modest 401K contributions, just about every hard-working American can and should be able to retire with millions of dollars at age 65.
But this is not the message that people receive. And this is not the reality for most people.
The average 401K investor only makes about 5% per year on their investments. People who follow industry best practices (Target Date funds) make about 6.5% per year on their investments which is better than average but still too low to create a comfortable retirement.
Making better fund choices which we teach in this program can generate a significant increase in investment returns for people. And having a strategy and system for dealing with stock market meltdowns (our Market Signals solution) can generate even higher returns.
It is not that difficult.
The industry says that people need to take on higher levels of risk to achieve higher rates of return. Our solution provides higher returns AND lowers risk.
I am on a mission to spread this word and to ensure all 401K investors achieve the kind of wealth that they deserve.
Seize the day with your 401k!
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
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