When I first launched this blog, it was based on three primary topics – Personal finance, career, and gaming. Over time I branched out to include a broader swath of topics, really anything of general interest, more like a diary. I think I am overdue to write an article centered on the original topic of Personal Finance.
As my homepage states, Zero Gravity is Launch. Quite fitting for anything financial considering the new catch phrase ‘To the Moon..!!’ which dominates the market today. If you don’t know what I am talking about, well you’re probably better off. But if you do want to read up on it, search reddit for AMC and GME stock posts. In fact, anytime I shoot a three-pointer on the bball court I now yell YOLO and To The Moon!! hahaha…
The past couple years has been a rollercoaster for the stock market. Most of 2019 leading into 2020, there was steady growth across the board. When the pandemic hit in early 2020, everything tanked and most folks saw their portfolio values cut in half. Many jobs were lost and the economy had to start re-inventing itself, with some industries being hit much harder than others. Most folks, like myself (or maybe I am alone in this passive approach), probably just left their savings portfolio ‘as-is’ (portfolio broadly referring to any types of accounts – standard savings, 401k, IRA, and investments), and others made withdrawals to cover reduced income and/or unexpected expenses, just to get by. Generally speaking, portfolios severely dipped and remained low most of 2020, however have since strongly recovered (and even shown decent growth) in late 2020 and early 2021. For others, it continues to be a battle for a return to some semblance of normalcy.
For a third group of folks (i.e. pro-active investors), the first months of the pandemic was quite a different story. There were many savvy investors who saw the market crash as a great time to buy – Almost like finding your favorite brand of clothing, technology, whatever it is, at a 50+% off discount. Those peeps have made out huge – Investment returns in the hundreds++ of percentages, portfolios literally tripling and quadrupling (and some growing exponentially) in size. Trouble is, not everyone has cash sitting around to throw into the stock market when the fire-sale starts, and this only broadened the gap between the working class and ultra-rich… A great illustration of the inequities of capitalism. Regardless, here we are over 1 year later, the market has generally recovered, although it certainly does not look the same, and lots of segments were left behind (i.e. Small businesses, restaurants, etc). Other industries have re-shaped themselves to lead the way in this new environment. If nothing else, the companies and stocks which have flourished are those backed by innovative technology, and in particular consumer goods niches, hi-tech, clean energy, biotech, and healthcare.
Through these ups and downs and twists and turns of the economy and stock market, a younger, tech-savvy group of investors has made themselves apparent. This is the generation where you can buy anything at the push of a button, on a smartphone – Now including stocks. (More so, at $0/trade commission after coincidentally enough all major trading platforms dropped trading fees in late 2019). A new ‘investor’ can in a matter of minutes research a stock, have a live conversation about the stock with others (again via reddit, yahoo, twitter, etc), and purchase in a matter of minutes. What is really game-changing about this is the social/psychological aspects – Going back to GME and AMC, these stocks are doing crazy things (spiking up to 400% returns, etc, as compared to what used to be considered good – ~7%). Stock rallies fueled by social communication platforms have become an outlet for folk’s mistrust and anger at the large banks who have for so long remained in control, an actual digital uprising if you will, is in progress. Lots and lots and lots of new investors tossing in what they can to purchase these two tickers, in hopes of sticking it to the man, and striking it rich at the same time. Not only that – Large players have also jumped in, as there are huge returns on investment being generated. Whether GME and AMC actually hold intrinsic value, time will tell, however it almost doesn’t matter at the current time, given the dynamics at play.
For me this has been a good learning opportunity. I’m traditionally more of a buy and hold type of investor, index funds through and through. It has been proven time and again that index funds will outperform individual stock picks. What fascinates me though and is the driver of this blog entry is the psychological aspect, which gets me thinking, why do we invest in the first place? Is it to accumulate money (and is it for now or the future)? Is it because we believe in the company’s mission? Is it so we can retire in comfort? All of the above? I’d wager it’s mostly about accumulating a greater amount of money, and to enable financial security in retirement. Maybe with a dash of ‘believing’ in the given company(s) mission to boot.
And that is a pretty boring reality to come face-to-face with. Tossing money into a 401(k) or IRA, in an index fund covering all kinds of boring manufacturing, textiles, technology, and other businesses, only so it can be enjoyed a few decades later, in retirement. Then again, most of us don’t necessarily have excess income that can be invested in shorter-term plays, hence the risk-averse approach makes the most sense. Rounding it out, if one approach seems to be a logical choice, but isn’t necessarily leading to any joy in the current day, nor has any personal beliefs behind it (i.e. going back to the idea of believing in a company’s vision/mission), I think it is time for a refreshed strategy.
Here is what I am thinking for a general set of guidelines for investing (whether in a retirement account or active trading/investment account):
60% – Index funds – This will always be the bread and butter
30% – Individual stock picks – More on this below
10% – High risk, high return picks – i.e. AMC, GME. This is gambling money, chances are you may lose it all. Maybe a 1 in 50 chance that it explodes into a huge return… hence limited to 10% max.
The 30% individual stock picks is where I think happiness awaits. Not just investing to make gains, but also taking into account other aspects which are so much more important: Things you enjoy, things that make you smile, stuff you are actually interested in, and things which are good for the world. We are all consumers, whether through online or in-person shopping, and we all have our favorite brands which we are loyal to. For example, say you are a shoe fanatic, you might always buy Nike shoes. So why not invest in some Nike stock each time you purchase a new pair of kicks? That’s the general idea.
I have narrowed down my interests to the following, which all also happen to be businesses with rock solid financial structures, based on the below-referenced YTD and 5-year returns. I have included my rationale for selecting each:
DIS – 6.09%, 95.50% – Disney, the name says it all. What I like about Disney is that everything they produce is high-quality, memorable, and brings lots of happiness to the world. Disney World/all the Disney movies/cartoons/toys/Kingdom Hearts games/etc. And from a business perspective, Disney clearly knows what it’s doing – From theme parks to licensing of retail goods, the prior strategic acquisitions of Marvel and Lucasfilm (star wars), and the more recent roll-out of Disney+ streaming services.
MSFT – 14.41%, 357.68% – Microsoft – they’re everywhere. I actually don’t like the fact that they’re everywhere. All joking aside, MSFT is tracking everything in Outlook, Excel, Word, etc., all in the name of ‘collaboration’, there is no more privacy. That is what tech giants do though (all of them). Why I do like Microsoft though is because they created the Xbox console/brand, which is near and dear to me. Great games, storylines, characters, puzzles, endless diversity in gaming experiences, I will always be a gamer.
SBUX – 7.68%, 81.88% – Huh, the only and only Starbucks. Some days I like Dunkin Donuts, other days I like SBUX. Dunkin Brands went private last year though, so I missed that boat. I just like the idea of investing in SBUX every time I buy a cup, seems like a good enough reason. Hahaha. On the business side though, SBUX knows whatsup, their stores are always busy and I only see sales increasing as things continue to re-open. Their stores are well-kept and the coffee is strong, hard to complain about that.
TGT – 15.61%, 153.89% – Target, kind of boring to be honest, however I really appreciate the quality of Target goods. Their stores are generally clean, bright, have anything you might need, their online shopping is very efficient, and their private label goods (i.e. Target brand items) are great quality at a lower cost than competition. A lot of retailers will sacrifice quality in terms of cost, however I view Target as maintaining a very good balance of both.
And that’s it, for now. To be clear, I do not (yet) have investments in each of the above. It’s my plan to do so moving forward. If I had invested equally in each 5 years ago, wow, would have realized an average 172% return.
Please note, this is not financial advice, stocks are a risky business. In fact the general consensus is that the market has been in a bull run for so long, that it’s going to crash hard pretty soon. Who knows what will actually happen though, that is why I am suggesting a 60% index / 30% individual picks / 10% higher risk portfolio. A dollar in your pocket, is a dollar in your pocket. In the stock market, it could be $0.10 tomorrow, or $2.00 tomorrow. It’s a big, complicated, ever-changing game, might as well have some fun and enjoy if you are going to play. 🙂
A final closing thought – Despite the financial focus – The best things in life, are free. YOLO TO THE MOON GO GO GO! :]
Cheers,
Zerogravity
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