#4 - The Chinese and how to think about stocks
Updated: May 4, 2022
Welcome, welcome wonderful Sunday people. This is todays two topics.
I've calculated in my head, and I think it take around 5-6 minutes to read.
That's okay right? I hope so.
Have fun! :)
The Chinese Markets
How to think about stocks
LETS GET READY TO RUUUMMBLLEEEE !!!!
The Chinese are waking up from their “sleep”
This week we’ve seen some really crazy moves, as is apparently the norm at the moment, in the Chinese markets. Monday the 14th they went down due to the news of new covid outbreaks in China. With their zero-covid tolerance they closed down entire cities, including Shenzhen which produces most of the stuff for the west. This news alone sent the market down around 10% during just Monday and Tuesday. Right after that, Wednesday the 16th, the Chinese then came out and addressed their regulations on the tech industry, their problems with the bank sector and their stock listings in the US. China has for the last year or so tried to really heavy regulate the Chinese stock market, especially big tech companies. This is the main reason why they’ve gone down, down, down. Here’s a 1 year graph of Tencent (behind Tik Tok), their biggest tech stock
As you can see. Down, down, down. For me this is a very good sign (the news, not that they go down), as it shows that China is ready to support their stock market in the other direction (being UP). For me one thing remains, and that is their exact position on Putin. If the US and the West in any way see that China (Xi Jinping) is helping Putin, then they will be sanctioned as well, with a red Chinese stock market to follow. That was it for this week’s update. Let’s look at stocks.
Stocks and how to think about them
Last time we talked about getting into your first stock, and that you should try to find one that you can learn from in the beginning.
This was in order to start the emotional journey.
I ended the newsletter with:
“When it comes to finding your next stocks, you should then start thinking about what they're doing, if they are making money, how they would look long-term, and so on.”
But this got me thinking. We can do that, yes, but I think we should take one step back first.
Take a more thoughtful or more philosophical angle first.
If this is boring as hell, please answer this email and tell me xD.
The first thing is how we should think about stocks.
The reason that I’m starting here is that stocks are very different compared to buying indexes or ETFs.
You can buy directly into that through an ETF, like we’ve talked about before (for new readers, I will upload the old newsletters on my webpage soon!)
If you only do that, you will over the long-term (15-20 years) beat most of your friends and certainly almost all ‘amateur’ investors out there. Which is the whole point, right?
We’re here to invest, and that means getting the most out of our money in the long run. Not this year, not next year, but over the next 15 to 20 years, or longer.
In the stock market, it’s always the patient ones that end up with the highest returns.
Sure you can try and throw your money into something like Tesla, and then close your eyes, but that’s only going well for <1% of people doing it.
So if we want to beat this 9% average, if that’s our benchmark, and we want to do it with stocks, we need to be smart about it.
We REALLY need to know what we are doing.
We can’t just buy some stocks here and there, and then hope. No no. Then you end up below the 9%, and then we might as well just pick the ETFs and do it the “boring but safe” way.
That’s the first thing I want to say about stocks.
Only pick them if you want to spend time on it, in order to beat the market average of 9%.
Otherwise stay with the large indexes and just follow the market averages. In the long run, you will be better off.
It’s like Warren Buffett said (he’s this rich guy, that has invested for like 60 years):
“By periodically investing in an index fund, the know-nothing investor can actually outperform most investment professionals. Paradoxically, when ‘dumb’ money acknowledges its limitations, it ceases to be dumb… Those index funds (ETFs red.) that are very low cost are investor-friendly by definition and are the best selection for most of those who wish to own equities (stocks red.)”.
Okay… Next time my friends, we are going to start on the stocks themselves, and how we know if they’re worth investing in.
I wish you a great Sunday, and a great coming week!
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