You’re playing against other people, against sophisticated algorithms, hedge funds, people with inside information, market makers… It’s almost impossible to find an edge against them.
Learn from your success and not only from your mistakes – let’s review mine:
Last time I had an ‘edge’ over the stock market, was in March 2020. I’ve seen everything in advance, the pandemic fear to buy, planned my steps. From some stupidity reason I didn’t execute my plan ASAP (negotiating with my bank about fees for weeks…) however then I went all in. So I’ve adjusted my plan, cause I’ve felt a bit late to the party, and instead of just buying large company stocks/ETFs – I’ve bought what I considered as fields that will be recovered later: transportation (mainly airways) and theaters (AMC and more). Also bought some oil ETF when oil was almost zero.
Most of it was brilliant – indeed airways took more time to recover, and oil also. However, theaters (later AMC switched to a meme stock) – I didn’t consider the important thing: the post-pandemic reality might be different than the pre one. Some things will recover, some things not.
However – almost anything you’ve bought back then would be a huge success investment, see the photo above. And the more you complicate things, you’ll earn less and risk more (BTC in yellow).
Finally – the lessons
- Buy ETFs, don’t mess with stocks and everything, most of them are going together and it’s hard to put the finger on the winning horse.
- Even with ETFs, don’t buy many. 2-3 are enough, even 1 is fine.
- Buy ETFs of sectors, popular ones, don’t mess with some niche ETF, when market crash anything can happen – go with the most popular and resilient ones – S&P 500, Nasdaq 100 or Daw Jones. The most successful one I bought was TPOR (transportation in US), however that was probably a luck.
- When you have an edge – don’t wait. When you feel late – don’t change the target. You can go 80% instead of all in, or cancel the plan, however the alternative plan might be wrong because it wasn’t planned like the original one.
- BTC doesn’t have an edge over US stock market since it’s correlated to it and have much more risks that are unacceptable on this atmosphere – you might not be able to withdraw from exchange, if you’ll need the money it will be hard to deposit it into your bank account, etc. Of course the reward might be huge, however it doesn’t worth the risk.
Are we getting a second March 2020 opportunity now?
Not necessarily. First of all, this is not a flash crash. Second, it’s too soon – investors experienced the March 2020 two years ago think the same – thus you’ve got no edge. And lastly, and most important – we’re on QT now, from the FED, and it’s just started.
We need to wait for one of the two – FED signaling QT over (stop raising interest rates and balance sheet reduction), and/or a closing event on Russia-Ukraine war. This closing event can (hopefully) be peace, however it can be the opposite – west doing something to put an end to this situation, like joining the war or killing Putin or something else. And there’s another scenario – global war, China invading Taiwan and Iran doing things in the Middle East, anything can happen – stay on cash.