The Long Term Investor

Too bad I had to spend $4000 on my water softener and plumbing issues this week.....I could have put that money to good use in the current markets.

 

OK...that was a cool close today. Especially considering that I was still mildly in the red about 15 minutes before the close. We obviously had a significant RALLY in the last 15 minutes today.

I ended with a nice borderline/medium gain today....in spite of NVDA and HD being in the red. P:US....I got in a nice beat on the SP500 today by 0.41%

 

The slow glacier rally all day today and the torrent of gains into the close makes me think we are at or near the bottom of this little correction. Especially with this happening going into a weekend. I see it as a good sign for the markets going forward.

AND.....I got my 32 shares of PLTR at the open today at $85 per share. By the close PLTR was at....drum roll please....$90.96. A gain of about.....$5.96....a 7% gain in a single day. I think I am going to become a market timer........NO.....no thank you.

 

The week that was.

DOW year to date (-0.96%)
DOW five days +1.27%

SP500 year to date (-3.42%)
SP500 five days +0.57%

NASDAQ 100 year to date (-5.76%)
NASDAQ 100 five days +0.28%

NASDAQ year to date (-7.76%)
NASDAQ five days +0.35%

RUSSELL year to date (-7.83%
RUSSELL five days +0.76%

As for my entire portfolio.....I am YTD at the close today (-7.37%). Last week I was at (-6.97%).

I am very happy with what I am seeing this week in all the big averages above.

 

OK....a break-through.....ALL the big averages were POSITIVE thsi week. We have now BROKEN the string of weekly losses.

HAVE A GREAT WEEKEND EVERYONE.

 

I probably should not say this....the PLUMBING POLICE will be raiding my house.

When the plumbers were here yesterday I commented....."I wish they did not have the flow restrictor/arreation screens...I would love to go back to the old days when facets ran free and you had better flow and pressure".

Well the plumber said...."you can".....than he screwed out one of the little faucet capsules and took his pocket knife and removed the little screen from the rear of the capsule. He screwed it back in and....BINGO....better flow and much more water....also....a nice tight stream of water.

When I saw that I told him to......remove those screens from every faucet and tub spout in the house. It is so nice. BUT......now the PLUMBING NAZIS will be after me.

 

I think retirement planing is really......sexy and exciting.....SMOKIE. You are doing the right thing.....planing ahead.

The 32 shares of PLTR were for my sibling. She had money left over from what she needed to pay her taxes. SO.....that money went into PLTR....at a BIG DISCOUNT.

I may not be a market timer.....but....I will take the current timing all day long.

 

How far are you from retirement....SMOKIE?

 

I like this little article.....SIMPLE....is the key to investing.

Barry Ritholtz explains how not to make stupid investing mistakes
The longtime adviser has written a playbook for keeping your strategy simple and not getting in the way of compounding.

https://finance.yahoo.com/news/barr...make-stupid-investing-mistakes-143030439.html

(BOLD is my opinion OR what I consider important content)

"Barry Ritholtz, co-founder and chief investment officer of Ritholtz Wealth Management and a longtime adviser, digs into the things that have made him “less stupid” in his latest book.

"How Not to Invest: The Ideas, Numbers, and Behaviors That Destroy Wealth — and How to Avoid Them" isn’t a navel-gazing reveal of his savvy investing philosophy, but rather a playbook on the theme that steering clear of errors is much more important than scoring wins.

I asked Barry to share the mistakes that trip most of us up and what we can do about it. Below are excerpts of our conversation, edited for length and clarity.

Kerry Hannon: Why are most of us better off sticking to a simple investing strategy?

Barry Ritholtz: Historically, simple beats complex. If you're going to make something more complicated, there has to be an absolutely compelling reason. The more complicated things are, there are more things to break. Think about how much money has been attracted to Vanguard and Blackstone's core indexing because it's simple and it works.

What are some of the pitfalls of building long-term wealth?

The biggest single pitfall is our tendency to interfere with the markets’ compounding.

When I ask people, what is a thousand dollars invested a century ago worth today? They say, oh, a million dollars, $2 million. When you tell them it's $32 million, their heads explode. It's shocking to people. But that's the power of compounding.

Please try not to get in the way of your own money compounding. It's the single best thing you can do.

What are other common mistakes investors make?

The more active you are, the more transactions you engage in, and the worse you tend to do because you're just creating more opportunities to be wrong.

And we believe a lot of nonsense. Some of it is just myths that get repeated from generation to generation or ping around trading desks. I always laugh whenever I flip on TV and the market is down 2% and someone says, markets hate uncertainty. Do they really? Because there's got to be a buyer and a seller. That means that there's a disagreement as to the value of that asset.

We are wildly overconfident in our abilities to do things that the professionals can't do. You know, no one would say to themselves, yeah, I could play Michael Jordan one-on-one in basketball. Nobody thinks that way.

But when you step into the marketplace, you imagine that you're going to beat the house, that you're going to beat Michael Jordan. But trust me, you’re not. Something like half of all the trades are done by institutions — highly qualified, deeply motivated with the latest, greatest, fastest tools. To imagine that you're going to step in and beat them on their home fields is just another mistake.

It’s also a mistake to not be selective when you dip into the fire hose of media that comes out about investing. You have to be a little discerning and discriminating. Curate viciously. You have to create your own team of people who you either watch or listen to or read. I don't mean you literally have to hire them, but hey, these are the people who have a defendable process. They've lived through a few cycles. They have a good track record. And it's not just dumb luck.

On my all-star team are Morgan Housel, Jason Zweig, and Sam Ro. They have just consistently added value and been more right than wrong. They don't run around with their hair on fire when we’re in the midst of a huge volatility spike.

What are some questions we can ask to avoid a lot of investment mistakes?

Always ask yourself, what are the risks of this trade? Is this tailored to me, or is this for a general audience? What's this going to cost — not just the outright costs, but fees, taxes, and, of course, lost opportunities. And who is giving me this advice?

What's their track record and do they have a conflict of interest? Do they have a fiduciary interest to zealously represent you and to perform their duties with diligence?

They can't guarantee you what the market or the economy's going to do in the future, but can they say to you, this is a reasonable portfolio that is defendable and rational and increases the odds that you'll have a successful outcome down the road?

You quote John Bogle, founder of Vanguard, as saying, “just buy the haystack.” In other words, stick with index funds. Why is that still a great philosophy?

In any given year, a majority of active fund managers underperform their benchmark, say, the S&P 500. Go 10 years and you’re in the single digits of managers who earn their keep and outperform the benchmark. Take it to 20 years, and it's virtually nobody. You end up with a handful of outlier names and they become household names because they're unicorns — Warren Buffett, Peter Lynch, Bill Miller.

With the indexes, you get diversification especially if you invest in a bunch of different indexes. You are guaranteed to find the Nvidias, the Apples, the Amazons, whatever are the biggest winners. And you get them in increasing stakes as they do better and better.

You say this is the golden age for investors. What do you mean by that?

You can move money around effortlessly. You can trade for free. You can buy anything. Back in the old days, if you wanted to own international stocks, it was expensive.

To say nothing of the power of walking around with this stuff in your phone, it's really amazing. Software and technology give investors tools that are just so simple and so inexpensive and so effective. That's why I call this the golden age of investing. We can do things people dreamed about 25 years ago.

Everybody gets second-by-second, tick-by-tick updates. You want to see how you're doing today, this week, month, year to date, the past 12 months — it's all right there. It's instantaneous.

But please don't look at your portfolio tick by tick. It'll make you crazy.

What is the importance of having a financial plan and working with an adviser?

There are ways to improve your life satisfaction with money. But a lot of people don't go about it that way. One of the ways that helps to get away from the money chase is that when you put a financial plan together, one of the things that ends up coming out of that process is the answer to: What is this money going to? Why do you want to put money in the market?

Maybe you’re saving for your kids' college, buying a house, or retirement. Now we know how much risk to take in order to achieve your goals. That draws down stress.

When you put a financial plan together, you take as much risk as necessary, but not more, to achieve your goals. You're working with intentionality, you're working toward a purpose. If you're not saving toward a goal, you end up taking on too much risk. That's how people lose sleep at night.

Having someone to talk you off the ledge and keep you focused on your plan is worth about 2% to 3% a year. That's a huge amount of returns that simply comes about because someone is preventing you from shooting yourself in the foot. And we, as investors, are our own worst enemies. If we can stop our bad behaviors, we're all so much better off."

MY COMMENT

So true, keep it....simple, simple, simple. AND.......ignore, ignore, ignore.

 

YES....another very simple lesson.

The perils of trying to time the market

https://finance.yahoo.com/news/the-perils-of-trying-to-time-the-market-160056262.html

(BOLD is my opinion OR what I consider important content)

"Like most people who invest in the stock market, I too get nervous when prices are going down. When the selling gets protracted, muscle knots sometimes form in my neck and upper back.

To cope, I do my best to remember that history teaches us big sell-offs are what stock market investing is all about, and that the path to long-term riches in the stock market is riddled with stomach-churning volatility. And importantly, “time in the market beats timing the market.”

With that said, let me tell you about a recent personal experience that confirmed to me that I’m the unluckiest market timer I know.

I bought the top, again

I consider myself lucky in many ways — except when it comes to timing the stock market.

To be clear, I do not trade actively much at all. But on rare occasions outside of regular periodic contributions to my retirement accounts, I’ve had the good fortune of having some extra cash to put to work.

I recently had one of those occasions.

On Feb. 13, I met with my accountant to do my 2024 tax returns. I learned I had some room to lower my taxable income. And one of the actions I took was contributing more to my self-employed 401(k) plan.

Wasting no time, I transferred cash to that account. And on Feb. 18, I added to my S&P 500 index fund position. The trade confirmation came in on Feb. 19.

Coincidentally, Feb. 19 was when the S&P 500 last touched a record high before rapidly tumbling into the correction we are living today.
.
Time is the unlucky market timer’s best friend

This is not the first time I found myself with some cash to put to work.

As I wrote in the March 6, 2022 TKer, I faced similar situations in late 2015 and late 2021. Both times, I made lump sum purchases into S&P 500 index funds.

And both times, those purchases were almost immediately followed by steep sell-offs.

The 2015 purchase happened while the S&P was on the precipice of a 14% correction. The 2021 purchases happened right as the market was entering a bear market, which saw the S&P fall 25% before bottoming in October 2022.

I am literally the unluckiest market timer I know.

Fortunately, my full-time job is researching the data and writing about having exposure to stocks during the market’s ups and downs. It’s helped me keep my investment decisions very informed.

I also have a carefully thought-out personalized financial strategy that takes into account the risk of big drawdowns. Importantly, I have a time horizon that allows me to ride out the downturns as I build wealth for the long run.

Thanks to having good financial information and a good financial plan, I held on.

And today, those older very poorly timed trades are in the black, and they’re helping me get closer to achieving my long-term financial goals.

The S&P 500 is up about 170% since my late 2015 purchase.

And it’s up about 20% since my late 2021 and early 2022 purchases.

As Bespoke’s Paul Hickey says: "Time heals in the markets."

Timing the market like Warren Buffett

Like billionaire investor Warren Buffett, I don’t claim to be good at timing the stock market. (Buffett receives praise for writing a widely circulated op-ed titled “Buy American” during the global financial crisis. Though, he published it in Oct. 2008 before the S&P fell another 26%.)

Fortunately, you don’t have to be a good market timer to be a successful investor. You just have to be able to put in the time.

Investing in the stock market will continue to be an unpleasant process as we cope with two conflicting realities: In the long-run, the stock market usually goes up; but in the short-run, anything and everything can go very badly.

As you do your best to keep your emotions in check, I suggest you remember the lessons from history. You can read all about them in TKer’s archives.

Timely perspective from the paid TKer archives

The stock market will test an investor’s mettle. Below is an excerpt from the January 23, 2022, TKer:

…Investing in the stock market is a challenging mental exercise.

Among other things, investors have to cope with two seemingly conflicting realities: In the long-run, things almost always work out for the better; but in the short-run, anything and everything can go very badly.

In an environment where news headlines seem overwhelmingly alarming, I think it’s helpful for investors to see what history says about the market implications of comparable events.

HOWEVER, it can’t be reiterated enough that 5% pullbacks and 10% corrections happen more often than not in any given year. Bear markets, where stocks fall by more than 20% from their highs, are less frequent, but they are something that long-term investors are likely to confront during their investment time horizons.

Unfortunately, it is incredibly difficult to predict when stocks will fall. And exiting stocks in an attempt to avoid short-term losses can prove incredibly costly to long-term returns.

So, whether or not you can comprehensively identify and balance all of the potential bullish and bearish market catalysts, it’s probably a good idea to just always be prepared for stocks to experience some big dips on their long upward journey…

(I OMITTED A BUNCH OF ECONOMIC DATA HERE.....click on the link to see it)


Putting it all together

Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices.

Demand is positive: Demand for goods and services remains positive, supported by strong consumer and business balance sheets. Job creation, while cooling, also remains positive, and the Federal Reserve — having resolved the inflation crisis — has shifted its focus toward supporting the labor market.

But growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less “coiled” these days as major tailwinds like excess job openings have faded. It has become harder to argue that growth is destiny.

Actions speak louder than words: We are in an odd period given that the hard economic data has decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continue to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.

Stocks look better than the economy: Analysts expect the U.S. stock market could outperform the U.S. economy, thanks largely due to positive operating leverage. Since the pandemic, companies have adjusted their cost structures aggressively. This has come with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth.

Mind the ever-present risks: Of course, this does not mean we should get complacent. There will always be risks to worry about — such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, cyber attacks, etc. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets.

Investing is never a smooth ride: There’s also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect to experience as they build wealth in the markets. Always keep your stock market seat belts fastened.

Think long term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t be able to overcome over time. The long game remains undefeated, and it’s a streak long-term investors can expect to continue."

MY COMMENT

AMEN to these couple of simple little articles and the lesson.....be a long term investor.....avoid market timing.....and....keep things simple......go for the compounding over all else.

 

If you care about the short term BALONEY....here you go.

The Fed's preferred inflation gauge and tariff talk: What to know this week

https://finance.yahoo.com/news/the-...ff-talk-what-to-know-this-week-113007466.html