Long-term investing has consistently been shown to be a reliable strategy for building wealth over time. While it may be tempting to try and time the market by jumping in and out of investments in an attempt to maximize profits, this approach is often futile and can even be detrimental to your financial success. The S&P 500 index, which tracks the performance of 500 of the largest publicly traded companies in the United States, has historically returned an average of around 10% per year. Rather than trying to predict short-term market fluctuations, it is generally more effective to adopt a long-term perspective and focus on building a diverse portfolio of quality investments that align with your financial goals.
The market action in 2022 gave me an unpleasant reminder of this universal truth. Let me tell you all about this awkward lesson.
Life is full of surprises
There’s always another shoe about to drop. Or maybe it’s an unexpected upswing across the board. You just never know what’s next. It is genuinely impossible to predict the unpredictable, and my K-Mart crystal ball was defective out of the box.
In hindsight, many of the shocking swings in 2022 make perfect sense. You can trace them back to original causes years ago, and many of them (but not all) converge on the coronavirus crisis. Government responses to the COVID-19 pandemic were imperfect around the world, sowing the seeds for factory closures, rising energy prices, shifting consumer spending patterns, and labor shortages.
But those long-term effects of lockdowns, stimulus payments, travel restrictions, and vaccine distribution strategies were not so obvious in real time. Likewise, I’m sure future historians will scratch their heads over how we’re handling the inflation surge, worker shortage, and currency exchange challenges right now. Looking back from 2028 or 2033, I’m sure the correct course of action will be obvious, in large, blinking neon lights.
We’re just too close to the action to see it yet.
What happened in 2022?
This shouldn’t have been news to me given I often repeat the universal truth that market timing doesn’t work. The only way to know for sure where the market as a whole or any particular stock will move in the next day, week, or month is to have absolutely accurate insider information before anyone else. It’s illegal to take advantage of that secret info and make guaranteed money in the stock market.
Perfect investing should be a completely emotionless exercise in analysis and money management. However, we’re all human. So in the middle of summer, when the inflation crisis appeared to have reached its final peak, I decided to take resolute action. If inflation-based pressures are going away soon, growth stocks that had taken drastic haircuts in the first half of 2022 were surely destined for immediate rebounds.
I like to keep some money on the sidelines for the next no-brainer investment opportunity. This summer, I saw such an opportunity. Most of that cash suddenly found its way into high-octane growth stocks that had seen dramatically lower share prices over the previous six or seven months.
- Digital ad campaign management specialist The Trade Desk (TTD -2.05%) had endured a 50% price drop so far in 2022 when I doubled down on that stock. The company is firmly profitable and growing fast, but perhaps a bit slower than analysts would like. The long-term opportunity in online ad sales is tremendous and The Trade Desk was on fire sale for all the wrong reasons.
- I picked up more Roku (ROKU -2.19%) shares on several occasions over the summer. The stock hovered around a 70% year-to-date drop in this period, almost exclusively because investors had become fearful of growth stocks with lofty valuations. Once again, I saw nothing but a wide-open buying window for a media-streaming stock with excellent long-term growth prospects.
- Freelance services reseller Fiverr International (FVRR -0.55%) spent that summer a few percentage points below Roku’s stock chart, waiting for investors to get over the idea that the company’s golden days had come and gone with the lockdowns of the early coronavirus crisis. Now that vaccines are widely available and life is going back to some semblance of normal operations, many market makers expected freelancing and contractor work to go away, too. I disagreed because Fiverr and friends are making the gig economy a perfectly normal alternative to a traditional career. So I bought more Fiverr stock in July at a 74% discount from last year’s New Year holiday.
The results of that binge have been mixed so far. As it turned out, the inflation crisis wasn’t really over yet, and the stock market as a whole was under continued pressure in the fall. The Trade Desk has traded in tandem with the S&P 500, falling 3% in roughly six months. Fiverr has clung closer to the more volatile Nasdaq Composite index, with price drops in the low double-digit area.
And then there’s Roku. I thought the stock was way undervalued last spring, only to take another 20% price cut after an underwhelming earnings report in July. Another round of gloomy guidance brought more price drops in November. By the end of the year, Roku’s shares had lost 82% of their value.
Lesson relearned: Market timing isn’t investing
I saw many signs pointing to a quick market recovery, which surely would send these stocks much higher in a hurry. The second half of 2022 didn’t play out as I’d expected. Many of the stock purchases I made in June and July have been wildly unprofitable so far, and I would have been much better off saving at least some of that dry powder for the even lower prices we see today.
Now, I didn’t do everything wrong last summer. I didn’t pour my cash into the latest, greatest flash-in-the-pan or any blink-and-you-missed-it penny stocks. We are still talking about great companies with promising futures, and they’ll be ready to thrive when this economic crisis is over — even if it takes several years.
That’s the real trick to successful investing. To quote master investor Warren Buffett, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” It’s all about the magic of compound returns on your investment over many years.
So I thought I was grabbing shares of wonderful companies at wonderful prices, but I’ll gladly settle for a merely fair price anytime. 2022 reminded me that market timing is just gambling under a different name. Long-term investing is still a proven money-making strategy. Come back in five or 10 years, and I’m sure the buys I made last summer will have made serious money by then.
Anders Bylund has positions in Fiverr International, Roku, and Trade Desk. The Motley Fool has positions in and recommends Fiverr International, Roku, and Trade Desk. The Motley Fool has a disclosure policy.
Investment funds that are moving to defensive positions, and some that are not – The Globe and Mail
What are we looking for?
ETFs and DIY mutual funds that made notable changes to their defensive-sector exposure over 2022.
The year is off to a great start for equity investors, with most equity indexes posting single-digit gains on a year-to-date basis, perhaps fuelled by investors’ reinvigorated confidence that the world’s central banks have inflation under control. That said, a new economic environment of higher interest rates might prompt some investors to have a look at their sector exposures, perhaps allocating more to defensive sectors for risk-reduction purposes, or to more cyclical sectors if they’re bullish on market prospects. To help identify potential candidates, I thought to analyze funds that have made noticeable moves over the course of last year. To start with, I screened the Morningstar Direct database for Canadian-domiciled equity ETFs and DIY mutual funds for those that have a reasonable track record, denoted by their Morningstar Rating for Funds or “star” rating of three stars or better, implying that the initial universe performed at least as well as category peers.
I then looked at the sector allocations of each fund as they appeared at the end of 2022 and 2021. Specifically, I used Morningstar’s “super-sector” definitions to determine which funds have the largest changes in exposure to defensive sectors. Recall that Morningstar’s classification structure for stocks divides global companies into three “super sectors”: (1) cyclicals, which include basic materials, consumer cyclical, financial services and real estate stocks; (2) defensive, which includes consumer defensive, health care and utilities stocks; and finally (3) sensitive, which includes communications services, energy, industrials and technology companies. I used the change in exposure to the defensive sector over the 2022 calendar year as the sole metric to rank the list of three-star-or-better funds.
What we found
The accompanying table includes 10 funds that have shifted their exposure toward defensive sectors the most, and the 10 funds that have shifted the furthest away from defensive sectors. The table also displays fees, trailing performance, ratings and inception dates. It is worthwhile noting that the three funds that have moved most into defensive sectors (XMTM-T, FCIL-T and IQD-T) are “smart beta” products, which are rules-based in nature and do not follow the discretion of a portfolio manager. Interestingly, the three funds are exposed to quite different factors. Also noted is the fact that several smart beta products that look for exposure to dividends (such as FCUD-T, XHU-T and VIDY-T), have shifted away from defensive sectors, while RBC’s actively managed mutual funds have increased their exposure to defensive sectors.
This article does not constitute financial advice. Investors are encouraged to conduct their own independent research before purchasing any of the investments listed here.
Ian Tam, CFA, is director of investment research for Morningstar Canada.
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CPP Investments Anchors New IndoSpace Fund with US$205 Million Investment – Yahoo Canada Finance
MUMBAI, India, Jan. 30, 2023 /CNW/ – Canada Pension Plan Investment Board (CPP Investments) today announced an investment of US$205 million as an anchor investor in IndoSpace‘s new real estate fund. IndoSpace is a leading real estate company in India. The investment marks the first close for IndoSpace Logistics Parks IV (ILP IV), the company’s fourth development vehicle, targeting US$600 million of total equity commitments.
This is the latest venture between CPP Investments and IndoSpace. The first joint venture, IndoSpace Core, was established in 2017 and now owns the largest portfolio of stabilized modern logistics assets in India. CPP Investments has also invested in ILP III. Following the investment in ILP IV, the partnership will exceed US$1 billion in assets.
ILP IV will add an additional 25-30 million square feet to the IndoSpace portfolio, furthering IndoSpace’s leading position in the Indian market. ILP IV will focus on India’s largest logistics real estate markets: Ahmedabad, Bangalore, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, and Pune. The establishment of ILP IV follows on from the first three development funds, which have a combined total of 56 million square feet of modern logistics real estate in India.
Hari Krishna V, Managing Director, Head of Real Estate India, CPP Investments, said, “Over the past few years, we have made numerous investments in India’s industrial space, where we see strong demand as the manufacturing sector continues to grow and the e-commerce sector matures. We are pleased to be working with our longstanding partner IndoSpace to further capitalize on opportunities in this space and believe this investment will deliver strong risk adjusted returns for CPP contributors and beneficiaries.”
Brian Oravec, Managing Partner and CEO, IndoSpace Capital Asia, said, “We are excited to extend our successful partnership with CPP Investments. CPP Investments’ commitment to ILP IV is a testament to IndoSpace’s leadership in the industrial and logistics real estate space in India. ILP IV will allow us to continue to expand our unique national network to better serve our customers. Industrial and logistics infrastructure is a key enabler of economic growth. To meet India’s aim of becoming a US$5 trillion economy by 2025, IndoSpace is excited to continue to be one of India’s key infrastructure creators.”
About CPP Investments
Canada Pension Plan Investment Board (CPP InvestmentsTM) is a professional investment management organization that manages the Fund in the best interest of the 21 million contributors and beneficiaries of the Canada Pension Plan. To build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. As per September 30, 2022, the Fund totalled C$529 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.
IndoSpace (www.indospace.in) is the largest investor, developer, and operator of grade A industrial and logistics real estate in India. IndoSpace has the largest national network of 50 logistics parks with 56 million square feet delivered/under development across 10 cities. With India’s largest and most experienced industrial real estate team, IndoSpace continues to lead the development of key logistics infrastructure for India’s economic growth. For more information, visit www.indospace.in and follow us on LinkedIn, Twitter, and Facebook.
SOURCE Canada Pension Plan Investment Board
View original content to download multimedia: http://www.newswire.ca/en/releases/archive/January2023/30/c6051.html
Zacks Investment Ideas feature highlights: Meta Platforms, Alphabet, Snap, Oracle and Global Social Media ETF
For Immediate Release
Chicago, IL – January 30, 2023 – Today, Zacks Investment Ideas feature highlights Meta Platforms META, Alphabet GOOGL, Snap Inc SNAP, Oracle ORCL and Global Social Media ETF SOCL.
TikTok Ban Coming: 3 Stocks That Would Benefit
The Social Media Landscape Is Evolving
The social media landscape has changed dramatically over the past few years with the rapid ascent of the personalized video platform app TikTok. Despite TikTok’s rapid rise, Meta Platforms and Alphabet are still the dominant players. In terms of monthly active users, three Meta platforms make up the top four rankings globally: Facebook (#1), Whatsapp (#3), and Instagram (#4).
Alphabet holds the second spot with its video platform Youtube and TikTok is ranked #6. Even with the continued dominance of existing players like META and GOOGL, stock performance has been lackluster in recent years. The Global Social Media ETF is the most followed social media ETF (note that it does not include TikTok).
What has Led to the Underperformance of Existing Players?
For one, Meta CEO Mark Zuckerberg is paying less attention to his lucrative social media business and instead investing valuable resources in what he sees as the future – the metaverse. Approximately 20% of Meta’s current investments are aimed at this project. While the bold bet has not panned out for Zuckerberg and Meta yet, he plans to stay the course.
The other major factor leading to the underperformance in domestic social media platforms such as Instagram, Youtube, and Snap Inc’s Snap Chat platform is TikTok’s success.
Chinese-based ByteDance launched TikTok in the United States in 2016, and since then, the platform has dominated. The app, which allows users to create and modify short-form videos, has caught on, especially with the younger generation. TikTok’s competitors have noticed. To win eyes back, Instagram has launched “Reels” and Youtube has created “Shorts” –aimed at users who prefer short, customizable videos like Tik Tok.
SnapChat, already in the short video space, has suffered the most from TikTok’s rise.
National Security Concerns
Though TikTok is one of the dominant global social media players and shows little signs of slowing growth – other factors may play a significant role in the social media space moving forward. Concerns are growing that ByteDance is collecting unnecessary personal data on its users and possibly supplying it to the Chinese government (the biggest rival of the U.S.).
Former President Donald Trump attempted to ban TikTok in 2020, but ultimately the app was able to remain active. The Biden administration struck down the potential Trump ban on TikTok but ordered a national security investigation.
A Potential Catalyst for Domestic Social Media Platforms
Even with the failed TikTok bans of the past, momentum is growing for a new possible attempted ban. In the past year, FBI director Christopher Wray, FCC Commissioner Brendan Carr, and Senator Josh Hawley have called for a domestic TikTok ban. Meanwhile, several U.S. colleges have implemented their own bans (via WiFi) amid security concerns.
Tuesday, Josh Hawley announced he would introduce a bill to ban the app. Investors who follow the social media space should keep a close eye on how the efforts to ban the app play out. If the app is ultimately banned, SNAP will benefit the most, along with META and GOOGL. Software giant Oracle, which supports TikTok via its cloud platform, would stand to lose.
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