Quick and easy in this one, three things to know and think about going forward to make us all better investors. It is the small things that add up to make us good investors and this episode covers three things to do exactly that.
As always, thanks for listening.
Quick and easy in this one, three things to know and think about going forward to make us all better investors. It is the small things that add up to make us good investors and this episode covers three things to do exactly that.
As always, thanks for listening.
Hey guys hope you're well welcome to the show. And today we have another episode where we bust finance myths and mistakes that we see pretty common in the day to day at the job. And I like coming on here and talking about these is the second episode of this kind of series, where we talk about three myths or mistakes that we see a lot. So let's jump right into the first myth. Past performance guarantees future results. absolute myth, not true at all. A lot of times, what we see is, especially in a year when you have some volatility, all companies and COVID was a really good example of this. All the companies that performed well before and then saw the pullback, a lot of times people get tied to that high number of saying, Okay, well, it was trading at $100 per share. Now it's 50, it has to get back to 100. So let me buy in here. And that's buying well, and while yes, that could be the case. Absolutely. It's not guaranteed to be the case. So when you're thinking about this strategy of buying the dip or buying low, it doesn't mean it has to come back. And we see this a lot with I mean, the one a company examples like a peloton. They were trading at a massive number, and then they've crashed down since and right now it doesn't seem likely that they come back and who's to say what happens long term. But that's a company like that, where you kind of see that you see a big swing up, the market realizes it overvalued it swings way back down. And then if people are buying the dip in the bottom thinking, Okay, well, if it was there, it has to go back. That's not true. Instead, think about it like this. Think about the market movements that we've had, and might have in the future. And then think about the individual companies going through that. So I'll give you an example. Last year, Amazon, well, for its history, Amazon's been a phenomenal stock has performed incredibly well. And it went down 50% last year where they're about. Now if someone bought the dip on that thing, it's down 50, I believe is going to come back, they'd be correct so far, because in 2023, it's up massively, it's performing incredibly well. So that's an example of when you buy the dip, you buy the low and you think okay, since it was here, maybe a little ahead of its skis people brought it back down to earth. Let me buy the dip. And let me make let me try to make some investment returns on your side of this goodbye and is performing well. But the other side of that is Amazon, a company that's a strong solid company. So a strategy like that is actually pretty sound. However, when you do this on something like a penny stock or a smaller stock or like peloton, peloton like I just mentioned earlier, it doesn't always mean it's coming back. So you need to kind of think of it as if I'm buying the dip. If I'm buying low, you need to know or have an idea of why you're doing so. And it can't all be tied to stock price like on Amazon, if you're buying them dip on them, you're buying low on them. The idea would be I see four to five Amazon bans a day. They're not going anywhere, they're still expanding. And Amazon Web Services is still growing as a majority of their business. Still today shipping now they're building out Amazon Prime they just bought MGM there's this laundry list of reasons why they're a good solid company, and maybe unfairly got beat up. When you think about someone like peloton you don't have that laundry list of reasons. So you need a list of reasons why you believe it's coming back. Because otherwise, you're just dumping money into something because you think on a hope of prayer wish that it's coming back. And that doesn't always have to be the case. And a lot of times it isn't the case. So you need to be very selective in how and when you're buying the dip. Because the myth that past performance guarantees future results. It's just not true at all, it does the exact opposite, it doesn't guarantee anything. So do your research on both the micro and macro environment for the stocks and companies ETFs and make sure you're investing in something that you believe in long term, even if it's pulling back a little bit. Now. The second one, this is more of a mistake that we end up seeing. And that's neglecting to rebalance your portfolio when you're investing, and I'll just use an easy one 60% stocks 40% bonds. A lot of times what will happen is you'll have when the years and the markets are good, the stocks will start that way the bonds so you'll have 65 70% stocks. And on the other side of that you'll have only 35 to 30% bonds. And if you don't rebalance that, and bring that stock back from 70% of your portfolio to 60 You're gonna be in a spot where you're just way too risky for what you want to be. And it's something that it's kind of hard to do because you see your value going up and you see all that and you're thinking okay, man like this is working. Let me just keep it running. And really at that time is the best time to cut it back because you got a little bit ahead of yourself. You made some money and it's time to dial back for when the times when the market dips back because it's inevitable that it's going to happen. So just prepare yourself for that and rebalance. The thing you don't want to do is let it run 23456 years without checking in on it and making sure everything comes back down to normal. Because, like I said, you might be taking on too much risk at any one time, or you might not be taken on enough risk at any one time. And both of those can be true if you have 60% stock and that pulls back to 50% of your portfolio because they're coming down in price and they're losing value, you might want to go ahead and transition and buy some more to bump that back up to 60. So when you see the rebounds you bought in a lower price, you see the rebound, and you come back up. Something to think about make sure you rebalancing your portfolio staying where you feel comfortable risk level wise and staying on the path long term, to making sure you reach your financial goals that way. And the third one another myth. And that's when people always invest in the trending or hot stock thinking it's going to work. A lot of times, we'll see when a company just had a phenomenal year, or a phenomenal quarter or month, whatever it is, and people get scared of missing it. You get scared of missing the next Amazon the next Apple in the next Microsoft and next Google, you get scared of missing these companies that perform so well for so long. Because you hear the stories of men and I invested this back in 1999. It's performed incredibly well since then. And those stories are true and accurate. However, you'll have more of these random bull cycles for stocks where they are up 1020 30 40% and think oh my gosh, I have to get in, I'm gonna miss the next 1020 3040. That's not always true. Avoiding the trending or hot stock while yes can hurt in the short term because you think you're missing out on a big opportunity to make a lot of investment returns, it'll in the long run, give you more peace of mind, because you're not going to be on this crazy rollercoaster ride. Because if a stock's up that much, the odds are, it's not going to keep that pace. If it's already up 30%, well, you missed it, the odds are it's going to be up another 30, much, much lower. Same thing, if it's up 20 or 40, whatever it is, it's a much lower possibility at that point. So you're better off staying on the sidelines doing your research again, making sure you believe in it. So if you are investing in 30%, higher than it was yesterday, it's one of those things where you're not selling it in a day because it didn't earn another 30 You're holding it for 235 years, because you think long term, this company has some potential here. And then it's just catching some steam. Now, every trend, every hot stock that we've seen, all the trend always tends to even itself out. You have people super excited for two weeks, three weeks at a time, and they're buying into this stock. And they're thinking you can't miss this, you can't miss this, this docks a homerun and then everyone kind of calms down a little bit, you might see the stock plateau or you might see it pull back a little bit. Those times will come even if it doesn't feel like it today or tomorrow or the next day, the time where that stock plateaus and people reevaluate what's actually happening. And if the stock and company's worth it long term, that time will come and then at that point you can reevaluate and see if it's something you still want. So again, always investing in the trending and high stock can be something that benefits you but for the most part it's much much better for you long term if you just kind of stay patient stay calm and wait to see the natural cycles that you see these things go through. Alright guys, that is the three I wanted to go to four myths and mistakes today. I hope you guys are Have a good one. Until the next time Stay happy, stay healthy, and I'll see you Securities offered through securities America Inc. Member FINRA slash SIPC. advisory services offered through securities America advisors Inc. Wealth Management Services and securities America are separate entities. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change anytime based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.