Valuation of momentum
Demand for gasoline
While there is some seasonality in this, this is interesting given that the consensus was that this would recover a lot faster when we were in February/March.
Trading can be addictive
Is the stock market a form of entertainment? Here is a story of a reporter signing onto Robinhood, the popular stock-trading app, to find out.
“My editor and I decided that I should see what the fuss is all about. I started trading on Robinhood on Oct. 27, expensing my $100 investment. Any profits I made would go to charity; any losses would go toward public humiliation. I closed all my positions on Nov. 17. I never did any research; the companies would be just ticker symbols to me. Such insanely risky, wildly fluctuating stocks would either make—or lose—a ton of money. That was the plan. In the end, after three hectic weeks, I finished with $95.01. I’d lost 5% of what I’d put in. Counting the free stock I’d gotten, I was down 10.2%. Over the same period, the S&P 500 went up 7%”
The lesson?
You can’t invest without trading, but you can trade without investing. Even the most patient and meticulous buy-and-hold investor has to buy in the first place. A short-term trader, however, can make money—for a while, by sheer luck—without knowing anything. And thinking you’re investing when all you’re doing is trading is like trying to run a marathon by doing 26 one-mile sprints right after the other. To invest means, literally, to clothe yourself in an asset. That gives a stock the chance to work for you over the years it may take for a company to prosper. It also minimizes your tax bills—and your stress.
Why do investor returns differ from mutual fund returns?
Why do Investor Returns vary from the profits of mutual fund houses? Investor Returns depend on:
• When you made your investment
• The price you paid
• Your holding periods
There are a few reasons why the mutual fund's returns are higher than your returns.
Most people invest in the fund when the market is soaring, and they see the fund performing well. A well-performing fund has a high NAV. So, the investor buys at a high price.
When the market reaches a low and the fund's performance drops, investors panic and sell. Optimism and despair control the investor's financial decisions. Situations lead investors to speculate rather than invest.
Over the years, the retail investor's holding period has reduced. You do not benefit with reduced holding period as you are unable to reap the rewards of compounding. Exponential results are possible only because of compounding which takes time to work.
