To become a savvy investor, it’s crucial to regularly reflect on your investment decisions. This means examining both your hits and misses to learn and grow. Don’t mistake a successful outcome for sound reasoning – doing so could lead you down a path of overconfidence, potentially harming your future investment choices.
In the short term, it can be tricky to determine if you’ve made a wise investment. The market is noisy and can easily fool you into thinking you’re a genius. Patience and humility are key, as it often takes time for an investment strategy to prove itself.
Rather than focusing on the short term, I’m a firm believer in identifying long-term investment trends. This approach can yield a much higher return on your time than trying to pick individual investments.
Let’s take a look at a case study. Currently, there’s a lot of fear and uncertainty in the market due to various factors, including geopolitical risks and an aggressive Federal Reserve. Despite this, I decided to make a bullish call on November 2, 2022, based on my belief that the upcoming inflation figures would come in below expectations, leading to an increase in risk appetite.
I felt that the investment community was missing the bigger picture, and we should be buying stocks ahead of the November 10, 2022 inflation report. As it turned out, the October inflation figures did indeed come in below expectations, leading to significant gains in the S&P 500 and NASDAQ.
However, I’m not just an optimist – I’m also a cynic, especially when it comes to those in power. I’ve seen too much corruption and manipulation to take everything at face value. I believe that senior officials at the Federal Reserve Board are more concerned with their legacy than the health of the economy.
Despite my bullish call, I expect to face resistance. I believe the Fed Board Governors will continue to publicly state their intention to raise rates, ignoring real-time inflation data. This could lead to a recession and job losses, but as an optimistic cynic, I’ve shared ideas on how we can still enjoy life while the Fed wreaks havoc.
Investing is a tough game to consistently win. Unless you’re a professional or an enthusiast, it might not be worth your time to come up with a public investment thesis and invest accordingly. It’s healthier and more financially sound to follow a risk-appropriate asset allocation model and a logical split between active and passive investing.
Spending too much time on your investments can drain your energy, which could be better spent elsewhere. Ideally, your investments should quietly work for you in the background.
Looking ahead, I believe the Fed will eventually give in to public pressure and pivot sometime in the first quarter of 2023. As a result, I expect the S&P 500 to be higher six months from my bullish call on November 2, 2022. I’ll also be on the lookout for real estate deals before mortgage rates drop.
The biggest risk to my bullish call is a larger-than-expected drop in earnings and a de-rating of the S&P 500. Only time will tell what the future holds! Now, I’d love to hear your thoughts. Where are you investing your money? What could derail a recovery? Let’s discuss!
