Investment plans are needed in your investment strategy in order for you to relax and not worry despite the market circumstances. Rather than picking and choosing what stock to buy because of the chatter, an investment plan gives you a sensible approach you can live by.
(28 November 2022 – 02 December 2022)
A big rally for US stocks on Wednesday offset the impact of Monday’s decline, sending the major stock indexes to modest weekly gains. The S&P 500 rose 1.13%, and the MSCI World Index finished up 1.09%. MoneyOwl’s 100% equity portfolio was down slightly at -0.46% as value factor underperformed in MoneyOwl’s Portfolio.
Stocks initially rallied on Wednesday after US Federal Reserve Chair Jerome Powell confirmed in a speech that smaller interest-rate increases could start as soon as the Fed’s December 13-14 meeting. Comparatively, Fed Officials had been approving rate hikes of three-quarters of a percentage point at each of their last four meetings.
The yield of the 10-year US Treasury bonds tumbled to its lowest level in two and a half months, settling around 3.61% on Friday after ending the previous week at 3.69%. The fall in yields came amid continuing signs that high inflation has recently been moderating, and the Fed will not have to raise its benchmark rates as much as expected. The falling yields also helped global fixed income, with the Bloomberg Barclays Global Aggregate Index up 2.13% over the week.
Time The Market At Your Peril
Last week’s rally in equities had investors around the world wondering if this was the last week before the Fed started pivoting their monetary policy and eventually decrease the benchmark fed funds rate. At MoneyOwl, we remain steadfast in the philosophy of staying invested for the long term rather than trying to time the market at your peril.
Technology has enabled immediate access to everything wherever and whenever we want it. In many cases, such as staying in touch with friends and family or keeping up-to-date about world events are good things. However, when it comes to investing and money management, as access to investing expands, it becomes even more important to adopt an investment plan that doesn’t try to actively pick stocks or time the market.
The purpose of having an investment plan is so you can relax. So you don’t look at the market every day, stressing out and asking, “How am I doing? How am I doing?” Investors who are actively trading are not just potentially missing out on the expected return of the market—they’re also stressed out, worrying about how the news alert they just received will impact their long-term financial health and whether they can or should do anything about it.
People are naturally drawn towards headlines touting quick ways to make money. However, the better approach for most investors’ long-term financial well-being is to make a plan, implement it, and stick with it.
Technological advancements have done a great job selling index funds. Over the past decade, the percentage of the stock market that is passively held has grown considerably, with equity index funds representing 52% of the US equity fund market at the end of 2021. And yet some investors appear to be using index funds to pursue an active investment approach. For example, the largest S&P 500 ETF had the highest average daily trade volume of US-listed securities in 2021, at $31 billion. So instead of picking individual stocks, people seem to be acting like stock pickers when buying and selling index funds and ETFs.
This is despite the overwhelming evidence and compelling story that point to the contrary. When economist Michael Jensen published his landmark 1968 paper, which showed that active stock pickers added no consistent value, other academics soon confirmed his insights. More than five decades and 50 years of data later, the theory still holds up. There are some stock pickers who experience success, but we don’t know if these are due to skill or luck. Picking stocks is more like gambling than investing. This academic research inspired the invention of the index fund, which allowed investors not only to buy the broad stock market in addition track the manager’s performance and compare costs.
To help keep investors from jumping from one thing to another, one should seek a trusted advisor. More than ever, the financial industry has made great strides in improving the investment options available, but we can do more in terms of helping investors with those options as their later years depend on it.
At MoneyOwl, our approach as a financial adviser is to get you out of the game of worrying and guessing by having a plan that can provide peace of mind. It’s a sensible approach you can live by.
The US labour market remains a source of strength in the weakened US economy, as 263,000 new jobs were added in November. It marked the fourth consecutive month with jobs gains in the 200,000 to 300,000 range and the 23rd month in a row with at least 200,000.
Beijing will allow some Covid-infected people to isolate at home, in a landmark shift that reflects the pressure officials are under from a record outbreak and public opposition to strict virus regulations. The move dials back a nationwide policy that has seen everyone with Covid sent into government quarantine to halt transmission chains regardless of severity. China has signalled a transition away from the harshest Covid curbs in recent days following protests across the country at the weekend. The relaxation comes exactly three years after the first documented virus case was recorded.
Apple is ramping up work on a mixed-reality headset, its first major new product category since the Apple Watch, and has renamed accompanying software in the latest sign of an upcoming debut. The company plans to introduce the headset as early as next year, along with a dedicated operating system and app store for third-party software, sources say. Meanwhile, Meta CEO Mark Zuckerberg has joined a chorus of voices, including Elon Musk, criticizing Apple’s App Store policies and fees.
A laboratory study using Covid-19 samples from an immunosuppressed individual over six months showed that the virus had evolved to become more pathogenic. It highlights how a new variant could emerge that causes more severe illness and death than the relatively mild Omicron strain. Meanwhile, Thailand is seeing a surge in serious Covid-19 infections and deaths as tourism recovers. The health ministry is urging people to get booster shots every four months.
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