The NASDAQ composite index (INDEXNASDAQ: IXIC) surged to an all-time high last Friday.
As shares hit new heights, familiar concerns are resurfacing.
For starters, can stocks continue to climb?
Or will they suffer a drastic fall like what happened back in late 2021?
For context, back in 19 November 2021, the NASDAQ index peaked at around 16,507, only to plummet 35 per cent by the end of 2022.
This painful experience remains fresh in many investors’ minds.
Thus, the most pressing question at the moment is whether you can still buy shares today.
Will you behave like a trader or an investor?
Having the right mindset goes a long way to answering whether you can still buy stocks today.
In particular, do you want to behave like a trader or an investor?
Here are the differences …
Firstly, traders will be worrying over whether the stock market will decline or rise this week.
Investors, on the other hand, are more interested in whether a business will be larger five years from today.
Next, traders often seek the perfect entry point where the stock market will rise after they buy.
Investors understand that volatility is part and parcel of being invested.
Hence, they are willing to wait for share prices to rise and reflect the value of the stocks they are buying.
Most of all, traders cannot stand the idea of the market falling after they buy.
In contrast, investors will welcome lower prices as it will allow them to buy more shares at cheaper valuations.
Unconvinced?
Sure, let me share an example from The Smart All Stars Portfolio.
Buying at market highs and market lows
Back in January 2022, just as the NASDAQ had begun to fall, the portfolio picked up shares of Meta Platforms (NASDAQ: META) at around US$323 per share.
Did the shares fall after that?
They sure did — at its lowest, Meta’s stock price even fell below US$90 a year later.
Did The Smart All Stars Portfolio give up on the stock?
Nope, not even close.
Instead, I urged investors to not succumb to fear or worse, and be indifferent to the fallen stocks.
In particular, my fear was that investors will miss out if they gave in to all the negativity.
But wait, what about Meta’s stock?
While the initial stock decline was painful, if you look up Meta’s stock price today — you may be surprised to learn that it is trading above US$733 as of Friday’s close.
That’s right.
Even though the portfolio’s buy at US$323 per share in January 2022 looked awful at first — today, that stock position is up by close to 130% in roughly 3.5 years, a pleasing return by any measure.
N.B. The portfolio did pick up more shares at around US$202, but that’s a story for another day.
Get Smart: Patience wins the day
What did it take to achieve the above?
One, we understood that we do not control where the market is headed in the near term.
Two, the portfolio followed the company’s business growth, not its stock price.
And three, above all, the portfolio exercised patience.
Best of all, all the three qualities above are well within the reach of any investor out there.
Give it a try, you may be surprised by what you can achieve.
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Disclosure: Chin Hui Leong owns shares of Meta.
