Are investing trends important?

Hello ladies and gents,

I am happy to report that today’s edition is newsletter number 10! I know it does not sound like a lot, but it is a good start on the way to 100. I hope we’ll be able to get there.

I would definitely not be doing this, if it weren’t for everybody that has subscribed so far and that continues to open these every Wednesday.

So THANK YOU! 💗

But, let’s jump to the last lesson of this year.

• Part 4 of Investing series - Planning and market trends

• Closing the Gap - Alex Cooper

• Book of the month - Intelligent Investor by Benjamin Graham - part IV

LET’S COVER THE BASICS

Are investing trends important?

We have arrived!

This is the 4th and last part of Investing series that we did in December. If you have missed the previous ones, you can find them here:

• Introduction to Investing  

• Types of investments

• Investment strategies and risk management

Today we’re gonna look at some investing trends that have shaped 2023.

Do you like trends? In fashion, travel, food? I semi-do. Not to brag, but I was definitely ahead of trend with matcha🍵 latte drinking 😏

But let’s focus on financial trends for now.

If you did not hear the word “artificial intelligence¹” or “AI” at least once a day this year, I’m not sure in which cave have you been living. More specifically, everybody was talking about generative AI that uses text to create new content in seconds, including poetry, art, music, videos, and more. I am sure everybody has at least once used ChatGPT.

And how does this affect the financial market?

In business, generative AI can enhance human creativity and productivity, which can transform how we’ll work in the future. That’s why industry experts believe that generative AI’s arrival could be as significant as the internet.

And how can you get into the action of profiting on this trend?

Either by buying ETFs that hold AI companies stocks or by buying individuals stocks of companies that have their products based on AI or products related to it. Or simply use AI for tedious work that can does not necessarily have to be done by human being and profit from some extra free time. Work smart not hard.

The entire technology sector was up this year quite a bit. And when I say “quite a bit” I mean a lot. The "Magnificent Seven" were on a roll this year, some of them went up 240%!

Yeah, I am sure many people were like this when they saw the numbers.

For the uninitiated - we're talking about Alphabet (GOOGL), Apple (AAPL), Amazon (AMZN), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA). The CAPS abbreviations in the (parentheses) are the stock tickers symbols².

Another trend that was very present this past year, was high inflation. Central banks tried to push it down by raising interest rates, which is no bueno, when you are trying to buy an apartment for example. However, there is one good thing that came out of it, which is higher deposit interest rates³. So if you were not sure on investing just yet, because the market was a bit uncertain, I hope you at least did something good and lent that extra money to the bank and profit from that.

Gold was another asset that people bought during this inflationary times. But unlike stocks, gold doesn’t produce anything for its owners. You won’t receive increasing dividend payments over time like with dividend-paying stocks. So why would you buy gold? Historically, gold prices often rise substantially during periods of high inflation.

Unfortunately wars also affect financial markets. With Ukrainian war still happening and a news Israeli-Hamas war in full-force, stocks of defense companies also went up. This shows how even isolated events have a global effect.

And another word that started trending this year again, and I think it’ll be an even bigger trend in the future, is the thing that people still give you a funny look when you mention it - crypto⁴. This wasn’t a trend among average investors, but definitely among all the hedge funds that started putting money towards crypto in the past year.

How so that crypto will again be on the front pages of the newspapers (and newsletters)?

Because the time has come when crypto will enter regular financial markets. In early 2024 we can expect the approval of the first spot Bitcoin ETF⁵ in US. We already have them in Europe though. All the big American hedge funds have applied to have their own ETF listed so we can expect this trend to rollover to next year.

Next year should be interesting. That’s for sure.

I hope you have enjoyed this investing series and that you have learned something new that increased your financial knowledge and confidence. I’ll try to bring you some new and interesting lessons in the future as well.

Until then remember:

I hope you will do that also by spending a couple of minutes per week reading The Female Gap.

I wish you all the best and talk to you in 2024!

GLOSSARY

• ¹ artificial intelligence - the theory and development of computer systems able to perform tasks normally requiring human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages.

• ² stock tickers symbols - a stock symbol or ticker is a unique series of letters assigned to a security for trading purposes.

• ³ deposit interest rates - the deposit interest rate is paid by financial institutions to deposit account holders.

• ⁴ crypto - A cryptocurrency is a digital currency, which is an alternative form of payment created using encryption algorithms.

• ⁵ spot Bitcoin ETF - an exchange-traded fund that tracks the price of bitcoin. The term "spot" refers to the actual immediate purchase and ownership of the underlying asset, which, in this case, is bitcoin. This means that the value of a spot bitcoin ETF will be directly correlated to the price of bitcoin.  

CLOSING THE GAP

Alex Cooper

Alex might not be known to many. I found about her this year only, but if she will continue with this speed, I am sure she will start getting more recognition.

She is an American podcaster who is the creator and host of the weekly Call Her Daddy comedy and advice podcast. In 2021, Time Magazine called her "the most successful woman in podcasting" after she signed a three-year exclusive deal with Spotify worth $60 million. Making $20 million per year made her Spotify's highest earning female podcaster and the second highest paid podcaster, behind only Joe Rogan.

This year she also started a new media company Trending and a new Gen Z-focused podcast network called The Unwell Network. She already scored big from the beginning. She signed Alix Earle and Madeline Argy — two TikTok personalities mostly popular with an audience born after Y2K. For us “old people” this means audience born after 2000.

Not too bad for someone aged only 29.

BOOK OF THE MONTH

The Intelligent Investor

by Benjamin Graham

To be an intelligent investor, you must take the responsibility for ensuring that you never lose most or all of your money. Losing some money is an inevitable part of investing and there is nothing you can do to prevent it. But how can you be cautious to avoid losing a lot of money? By refusing to pay too much for an investment.

The risk in not in the stocks, but in ourselves. If you underestimate how well you really understand an investment or you overestimate your ability to ride out a temporary plunge in prices, it doesn’t matter what you own or how the market does.

And it all comes down to the decisions you make. According to Nobel-prize-winning psychologist Daniel Kahneman, there are 2 factors that characterize good decisions:

• well-calibrated confidence - do I understand this investment as well as I think I do?

• correctly-anticipated regret - how will I react if my analysis turns out to be wrong?

Graham says, that we should look at investing like a business. Like we own and run the business we invested in. With that in mind, we should adhere to certain business principles.

1. Know what you are doing - know your business.
   For investor this means that he must not try to make “business profit”. What this means is, that he should not anticipate returns bigger than average returns and dividend payouts. I would translate this principle in “manage your expectations.”

2. Do no let anyone else run your business, unless you can supervise them with adequate care or you have unusually strong reason for trusting them with your money.
   This does not mean that you should not ask for advice from informed individuals, however, you need to understand what you are doing and essentially make the end decision.

3. Do not enter a business unless a reliable calculation shows that it has a fair chance to yield a reasonable profit.
   Keep away from ventures in which you have little to gain and a lot to lose.

4. Have the courage of your knowledge and experience.
   If you have formed a conclusion from the facts and if you know your judgment is sound, act on it - even though other may hesitate or differ.

The probability of making at least one mistake at some point in your investing lifetime is 100% and those odds are entirely out of your control. However, you do have control over the consequences of being wrong.

By permanently diversifying and refusing to throw money at Mr Market’s latest trends, you can ensure that the consequences of your mistakes will never be catastrophic. No matter what Mr Market throws at you, you will always be able to say “This too shall pass”.

Which is conveniently also one of the quotes I use a lot.

And this concludes another month and another book. If you missed a part of it, you can expect me sliding into your inbox with the bonus newsletter on the 1st of January 2024 with the entirety of this book, so you don’t have to click back to previous editions.

SOME NEWS

• Would you like to learn more about AI? Than The Neuron is the thing to read.

• AI can now tell if your LV bag is real or fake. So beware.

• Now we can talk about fashion trends as well. These were the most important ones in 2023. I have definitely bought into a couple of them.