Readers of this column are likely aware of some of the\nbizarre events transpiring in the equity markets today. Among them, stories of\nReddit chatrooms driving short squeezes and massive single-day moves (in both\ndirections) in companies with relatively weak fundamentals. If parts of the\nenvironment feel like the 1990\u2019s dot-com bubble to you, I\u2019m right there with\nyou.<\/p>\n\n\n\n
Some of the numbers are eyebrow-raising, to say the least: Morgan\nStanley reported growth of approximately 900,000 new self-directed accounts in\nthe second half of 2020; Charles Schwab (which is now combined with TD Ameritrade)\nhas been routinely breaking records for daily client trades, processing some 8\nmillion daily; the online trading platform, Robinhood, which targets\nmillennials and younger investors, saw 500,000 downloads in December alone; a\nrecord 10 million new brokerage accounts were opened in 2020.1<\/sup><\/p>\n\n\n\n __________________________________________________________________________<\/p>\n\n\n\n See Why You Should Stick to the Fundamentals, Quality and Diversification!<\/a><\/strong><\/p>\n\n\n\n If this current narrative surrounding the market has taught\ninvestors anything, it is the importance of sticking to fundamentals, quality\nand diversification. Instead of falling prey to short-term, single-day moves, the\nkey is to stay focused on a diversified portfolio of quality,\nearnings-generating companies that can positively impact your investments in\nthe long-term. It\u2019s better to focus on the facts and data when it comes to\nmaking future decisions!<\/p>\n\n\n\n To help you do this, I am offering all readers our\njust-released Stock Market Outlook report. This report contains some of our key\nforecasts to consider such as:<\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today! __________________________________________________________________________<\/p>\n\n\n\n Normally, I would support retail investors opening accounts\nand starting down a long-term path of saving and investing for the future, but\nnot in this format. I\u2019m concerned many of these investors are new to investing,\nand are trading on speculation, over-concentrating in \u2018hot\u2019 positions, and\ncommitting too much of their liquid net worth to short-term trading. I hope I\u2019m\nwrong, but there is a long history of this type of enthusiasm\/euphoria leading\nto major losses. History tells me that volatility and \u2018heat chasing\u2019 mints more\nlosers than it does winners.<\/p>\n\n\n\n There is also growing evidence that retail investors are pushing\neven further out onto the risk curve by using leverage. Investors borrowed a\nrecord $722.1 billion on margin through November 2020, Charles Schwab reported\na 16% increase in average margin loans balance in the last three months, and\nanalysts at Piper Sandler noted that off-exchange trading \u2013 which captures the retail\nmarket \u2013 accounted for 48% of total trading in the first two weeks of January. Investor\nenthusiasm could be approaching a crescendo, which has historically given way\nto a reckoning of some kind.3<\/sup><\/p>\n\n\n\n The more I see the stories build and engulf the financial\nmedia narrative, the more I am inclined to double-down my focus on quality and\ndiversification. The temptation of triple-digit gains with just a few trades \u2013\nand the \u2018fear of missing out\u2019 that many investors feel when they see\nget-rich-quick stories \u2013 often lures even the most disciplined investors to get\nin on the action. Doing so goes against just about everything I\u2019ve ever learned\nabout investing, however. When the market\u2019s sirens are singing, it\u2019s crucial to\nstick to the plan.<\/p>\n\n\n\n Most investors can get where they need to go over the\nlong-term by owning a diversified portfolio of stocks (generally speaking, 30 \u2013\n60 stocks). Positioning a portfolio across sector, style, size, and country\nwill almost always provide exposure to the best performing areas of the market\nwhile minimizing the impact of the weak performing areas of the market.\nVolatility gets smoothed out over time, and an investor can earn attractive,\nequity-like annualized returns. It doesn\u2019t have to be more complicated than\nthat, and investors don\u2019t need a huge win in a single stock bet to get there,\nin my view. The journey to long-term wealth is also a lot less stressful, in my\nexperience. <\/p>\n\n\n\n Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n In my view, some of the bizarre behavior we\u2019re seeing in the\nmarket is a clear signal that investor enthusiasm is approaching a crescendo,\nwhich usually gives way to a correction of some kind to clear out some of the\nfroth (and, unfortunately, wipe-out many over-risked and over-leveraged\ninvestors). My advice: avoid getting caught up in the swirl of rumors,\nchatrooms, sharp one day move, and hot stocks, and steady your investment ship\nto stay focused on a diversified portfolio of quality, earnings-generating companies.\nIf you want to take some chances on some individual stocks or short-term\ntrading, fine \u2013 but my advice is to never commit more than 10% of your liquid\nnet worth to it.<\/p>\n\n\n\n If you choose to give into fear and sudden emotional investing, you could miss out on positives in store for the market not only this year, but also down your financial timeline. To help better position yourself for what\u2019s to come, I recommend focusing on what matters – key data points and economic indicators that could impact your investments. To help you do this, I am offering all readers our <\/a>Just-Released February 2021 Stock Market Outlook Report<\/a>. <\/strong><\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today! More new investors, more risky bets, and more leverage all point to a market correction coming up<\/p>\n","protected":false},"author":3,"featured_media":8874,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-9297","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9297","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9297"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9297\/revisions"}],"predecessor-version":[{"id":10459,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9297\/revisions\/10459"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9297"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9297"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9297"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
IT\u2019S FREE. <\/strong>Download the Just-Released Februa<\/strong><\/a>ry 2021 Stock Market Outlook<\/a>2<\/a><\/sup><\/strong><\/p>\n\n\n\n
This report looks at several factors that are producing optimism right now and contains some of our key forecasts to consider such as:<\/p>\n\n\n\n
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