The Virus through our Investment Lenses
Our Specific Experience In early 2020 we had a unique traumatic experience not seen for over a century : the deadly pandemic of COVID 19. Society, life, the economy and financial markets were shocked. Real pain and fear ruled supreme.
Old Truths and Recent Lessons
The recent great crisis reminded us of certain truths and lessons. A) Do not bet against the human race. Progress of humans in science has been tremendous. Anything humans undertake together can be achieved.
VALUE vs GROWTH
Historically, over the very long term, investing in value stocks has delivered better returns than investing in growth stocks (MSCI defines value as stocks which are cheap based on price-to-earnings, price-to-book and dividend yield metrics, relative to the market).
Investor Biases; irrationality and common investor mistakes
While traditional finance assumes that investors will rationally calculate probabilities of outcomes to maximize utility, behavioral finance suggests that we make decisions based on bounded rationality and instead of maximizing our benefit, we come to satisfactory conclusions without necessarily getting what is best.
Early July 2020 thoughts
A) The stock market started the second half of 2020 strongly as the economies are reopening and medical news are fluctuating. B) The markets are clearly linked to the COVID-19 statistics.
Market Comment May 2020
Don’t bet against America; you can still buy the dip as the market rebounds History has shown that the SPX has returned to growth after significant drops many times. For example, the index decreased by 34% within a month after the Dot-com bubble burst in 2000, started rebounding in 2002 and had surpassed the dot-com high by 2007
Plant the seed and watch it grow…
“In the short run, the market is a voting machine, but in the long run it is a weighing machine.” – Benjamin Graham
Owning stocks pays dividends
Pay dividends: To cause or produce good results in the future due to an investment of time, money, or other resources.
2019 in Retrospect
A) We noticed the ‘reversion to the mean’ principle. This observation characterizing many natural phenomena took place again in the stock market. After a dismal 2018, especially at the end of the year, we enjoyed one of the best years ever for the stock market in 2019.