Three unfortunately-timed trades I made 🤦♂️
One is now working out. The other two are currently in the red. 📉
I read about stocks and the stock market pretty obsessively. I’ve been reporting on and writing about stocks for about 17 years. From 2006 to 2009, I spent most of my free time earning a CFA charter to better understand how the financial markets work.
But I don’t trade actively much at all.1
Almost all of my exposure to the stock market right now has come over the years through regular contributions to equity index funds in a 401k plan or some occasional modest purchases of similar funds through an online brokerage account. I bought a handful of shares of Walmart in 2015, which I haven’t sold. I also bought one B share of Berkshire Hathaway recently, mostly because I might want to get a pass for the company’s annual meeting.
There were three other unusual trades I’m gonna talk about today.
Because I’ve been self-employed since October, I haven’t been making automatic contributions to a 401k. But the government says I can take advantage of an IRA. So in late December, I made the max contribution and tossed all of it into an S&P 500 index fund.
And then the new year came around. That first week, I made another max contribution and again tossed it into an S&P 500 index fund.
Both of those trades are in the red.2
What an awful feeling. Also, a familiar feeling.
Back in 2015, I got a modest windfall after my employer was acquired. Not long after that in December, I put a decent chunk of it into an S&P 500 index fund.
And then the stock market tumbled.
The S&P 500 fell 14% from its December 2, 2015 high of 2,104 to its February 11, 2016 low of 1,810.
In writing this piece, I had to look up the numbers because I honestly didn’t remember the magnitude and duration of that sell-off. But I remember that days felt like weeks and weeks felt like months as I told myself this would eventually turn around.
Fortunately, that was money I wasn’t going to need for a long time, and I was able to hold the position.
As of Friday, the value of that unfortunately-time purchase had more than doubled. And that’s after accounting for this year’s selloff.
There are three takeaways from this: 1) I may be one of the worst market timers in the history of buying stocks. 2) Short-term losses are incredibly unpleasant. When your long-term plan says to hold onto these positions when they are down, time can feel like it’s slowing down. 3) It is possible to put money into the stock market just before a major selloff and still make money. History says you just have to put in the time.
More from TKer:
📉 Stock market falls: The S&P 500 fell 1.3% last week. The index is now down 10.2% from its January 4 all-time high. For more on market sell-offs, read this.
⚠️ As the stock market swings wildly, keep in mind that some of the sharpest short-term rallies follow the sharpest sell-offs. This has serious implications for long-term returns. For more on this, read this and this.
💼 Jobs: U.S. employers added a whopping 678,000 jobs in February, according to BLS data released Friday. This was significantly higher than the 423,000 jobs that economists expected. The unemployment rate fell to 3.8% from 4.0% in January. For more on what’s powering the economy, read this.
🏛 Powell spoke: Fed chair Jerome Powell testified before Congress on Wednesday and Thursday. On the subject of monetary policy, he said that he is “inclined to propose and support a 25-basis point rate hike” in the Fed’s upcoming meeting in mid-March. For more on the Fed tightening monetary policy, read this.
🇺🇦 Powell’s also watching Ukraine: From Powell’s prepared remarks: “The near-term effects on the U.S. economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come, remain highly uncertain. Making appropriate monetary policy in this environment requires a recognition that the economy evolves in unexpected ways. We will need to be nimble in responding to incoming data and the evolving outlook.“ For more on Ukraine and geopolitical risks, read this.
🛠 Manufacturing picks up: According to the Institute of Supply Management (ISM), manufacturing activity accelerated in February. “The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said on Wednesday. “The COVID-19 omicron variant remained an impact in February; however, there were signs of relief, with recovery expected in March.” For more on manufacturing, read this.
🧑🏻🏫 Services decelerate: The ISM also said that service sector activity grew, albeit at a decelerating rate.
Up the road 🛣
Thursday comes with the February consumer price index (CPI) report. Economists estimate CPI was up 7.9% from a year ago, or 6.5% when you exclude food and energy prices.
While these readings would represent multi-decade highs, they are largely expected and represent a big reason why the Fed’s has been talking about raising interest rates in recent weeks.
Back in 2007 to 2009, I tried my hand at trading some stocks to gain some experience — and a little bit of alpha of course. Everything was in accordance to my then-employer’s trading policy. Over that period, I had bought about a dozen different stocks. Simply put, I underperformed significantly. I was also trading into a bear market and a global financial crisis, and so I lost money on literally every position. And that doesn’t even include the fact that trading commissions were a lot higher back then. Consequently, I lost my taste for trading individual stocks right around then.
See the last two months’ worth of TKer posts for what’s going on with the stock market.