Stocks should fit the investor
While I write a lot about the market overall, many people ask me for specifics about particular stocks. Sorry, but promoting a particular stock is not likely to happen on this site, that’s Reddit’s niche. This blog is intended to help people manage their money and understand the stock market overall, its mechanics, its rhythms, what influences it, etc. That said, I think it is helpful to talk about types of stocks. I don’t mean A shares versus B shares of a particular stock or even ETFs versus mutual funds, I am referring to the characteristics of a stock.
Everyone should enter the stock market with a clear view of what they want to get out of the market, besides making money that is. Depending on the individual you may want your stocks to generate income immediately or you may want to buy stocks to fund a toddler’s college fund. You may be the type who panics about losing money, or you may be gambler looking for the big payout that will give you bragging rights. No matter what you want to get out of the market, there are stocks that will fit your requirements. At least they will on the days you buy them.
I am conservative in my investment style. This is largely because I am older and want to preserve and safely grow my capital. In the event of a major downturn in the market, say one brought on due to an extended recession, I may have to wait a year or two for the market to rebound. Given my age, I may not have that time. Because of this I tend to buy well established stocks that pay a good dividend and then supplement the income they generate by writing calls against my positions.
I have a friend, a little older, who focuses on tech stocks and growth stocks in general. She pays no attention to dividends. She wants appreciation. She has had a great ride these past few years. Her portfolio has grown in step with the NASDAQ, which is well ahead of the S&P index. She is disciplined and trims regularly but she is shaken every time the NASDAQ drops suddenly. She is willing to take more risk than I am.
I get jealous of her returns, but I know I would not be comfortable owning her portfolio. Different people/different requirements/different stocks.
You need to consider what your requirements are and then decide what stocks fit that need. Not every stock in your portfolio has to be a prefect fit. Despite my conservative nature, I do occasionally buy speculative or growthy stocks. For example, I have a charging station stock, a shares of a new AI company, and another company that makes the composite used to make wind turbines. These, however, are less than 2% of my portfolio. My friend, on the other hand, is learning to use options and is supplementing her income. It is always good when investing to stretch out of your comfort zone and try new strategies once in a while. Keeps things from getting stale. Just limit what you do to a small slice of your portfolio to test the waters. Just remember, be prepared to let a stock go.
Market Today: Market stalled a little today, but nothing major. Ended August up. The ZM call I wrote yesterday insulated me somewhat against the 16% drop in that occurred after earnings. It gave me a one of my more profitable option trading days. Mind you, I will be put ZM, at a loss, but I am confident I can write calls against it until I can get out profitably. I have already made a great deal on ZM puts and calls, so I am almost whole anyway. I also prepped for a possible September downturn by writing calls against the majority of my holdings and selling some losers that were up today. I may be wrong about a pull back, but being prepared is a good feeling.