“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” — Robert G. Allen
The stock market is declining since the pandemic started and investment strategies may need to change in this current economy as a result. This topic is important to me because my clients, colleagues, family and I are at a loss in the stock market right now. Further, traditional technical analysis that worked well before is not as effective in today’s market.
I know that the Technology stocks are down right now, however I am not sure what other sectors are, nor do I know exactly why this is the case. Warren Buffett spoke on the state of the economy during the 2017 annual meeting and referenced the idea of buying stock in companies that are so good they could be run by an idiot. This does not hold as much weight now because the statement is favoring the idea that a good company in the past will remain a good company in the future. However, that is not always the case.
The future is not bright for companies that are not getting up to speed with the digital era.
“There is an opportunity to innovate a new alpha playbook. Step one in generating alpha is to produce genuine insights into the managerial skill, culture, and distinct, adaptable capabilities of a company and translate this to warranted market valuation. Step two is to ideally allow the portfolio to be concentrated and unconstrained by size, sector, and style to maximize intangible asset insights wherever they are found. Step three is to embrace a long-term ownership mindset, that is, be mindful that management’s planting of intangible assets seeds and nurturing an adaptable business model requires a long-term vision.”
Madden, J. B. (2019). The World Has Changed: 0RW1S34RfeSDcfkexd09rT2Investing in the New Economy1RW1S34RfeSDcfkexd09rT2. The Journal of Wealth Management, 22(2), 87-98. http://dx.doi.org.proxy.pba.edu/10.3905/jwm.2019.1.076
This is a fascinating and interesting topic I know very little about. I am sorry to hear this is affecting your family. I have never known enough to invest in stocks. What interests me is politics. I believe they are heavily involved in Wallstreet breeding power through wealth. It appears the rich keep getting richer and they do not want “smaller” people to win in the rat race.
You are correct. Good companies to invest in are changing because of technology. Though I believe technology is not all good, it has shed a light on some hidden darkness.
I only have a rudimentary understanding of the stock market. I have always invested with the company where I’ve worked since I was able to purchase stock at a lower price. I agree with you that the pandemic had a detrimental influence. I hope researching this topic will help you and your family decide whether or not to invest.
I think this book could aid in your research to determine why technology stocks are down.
Baker, S. R. (2020). Unprecedented Stock Market Impact of COVID-19. National Bureau of Economic Research.
I found an interesting book that I think you might want to look at. It describes the volatility of the market you have been questioning with a focus on emerging patterns that can be seen through mathematics and statistics.
In my own research I have found that despite the seemingly random market activity, others have managed to find rare but predictable patterns that are evident in today’s charts. I do agree that there is some behavior that is completely unpredictable. And in that case I would refer you to your current trajectory of researching market psychology in terms of a company’ s deeply perceived competence as you have mentioned.
However, again, (and I know I’m going back and forth) there are examples of “random” becoming clearly not random, such as Bitcoin’s Wyckoff model similarities. This is described in this video:
What I aim to say is that I think the market is a mixture of manipulation and mathematics
Joshi, M. (2008). Part VII: The Influence of Mathematics – 09. The Mathematics of Money. Princeton University Press.
Don’t wait until you understand it fully because it might be too late. Jump on board right now and let’s get this ball rolling so we can come up! These prices will be dipping low for us to take advantage of. I hope you are ready to come up.
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