Long-term investing: are STOCKS SAFE?

Hi everyone and welcome to this new video. Before starting, I would like to thank everyone for the achievement of 168 subscribers. I know that by the standard of the general YouTube channels, it may not seem like a huge achievement, but it is for me. Of course, we are still far from the 1000 subscribers. That is usually the target that every YouTuber would like to achieve. Right? I am confident we can reach that. Right. We are slowly increasing our count. It means that the content is considered useful and I'm very happy for that. I know that I'm a little late because I've been very busy this period with a lot of side projects, but I hope that I can upload at least one to two videos every week in the coming weeks. So the topic today is related to investing because you may have realized in the last videos that I'm moving to a more passive in a way approach where I don't want to do trading anymore, at least not as much as before, and I want to move to a long term investing approach. However, even in the long term investing approach there are some risks because when you are doing trading you enter your position and then you have a stop loss. So in theory, when the price is going down and then you hit stop loss, the position is closed in. Investing is a little more tricky because you don't have usually a specific stop loss and you need to exit based on some rules that you determined before. It can be, for example, when the fundamentals of the company are deteriorating or or other things that depends on the strategy that you are employing. The problem is when something that is not in your set of rules happen, then what do you do? Maybe you invest in a company that was solid, the fundamentals were good, and they are still good, but the price is going down, down, down and then you don't know what to do. Maybe you start to hear news and people say, well, this company is not good anymore. But then whatever you read in the news is not actually maybe part of your rules for closing the position. So you are in this dilemma where you don't know if you should close the position or stay invested. And I tell you, usually what happens is that you stay invested. Why? Because it's much harder to close a position at a loss than saying, okay, I just stay here because I hope it will recover and I'm confident the fundamentals are good, it will just be a temporary drawdown and then it will bounce back. So the reason why I am mentioning that is because I said I want to go to a more passive approach where I want to invest in long term strategies. However, I'm not saying that I will do just with stocks or the majority of my investments will be stocks. Because what I like and I want to share with you is the ETF Exchange Traded fund. So I want to give you an example here to explain what I mean. If you see here, right, this is the Alibaba, okay, Alibaba was doing very well, right? And then it was trading end of Last year around 300. See here right now what is the problem? The problem is that the price started to go down, down and now is around 160. So from 300 and let's say 320, 260 is basically minus 50%, right? If you start from here is minus 41%. Now the question is maybe you think that the company is still strong, right? And then you see the price is going down like that. What do you do? Do you really have the confidence to say, hey, the company is still strong, so I should hold it even though it's going down? Because there is nothing in my exit rule strategies that tells me that I should stop or cut the losses. That's the key issue, in my opinion. When you are investing in stocks, when something that is not in your list of rules that often are discretionary, when something that is not there happen, then you don't know what to do. And then it's very easy for people who are selling courses or things like that to say, hey, yeah, you know this one, you should close the position because of this reason or that reason. Of course, you know, you should have closed because of this, because of that. But this is very easy to say after, right, when you see what happened, but not when you are in the ride. So what would you do if you are holding Alibaba? Would you sell now? Would you wait, maybe sold earlier, who knows? Because if you look here, in the last five years it was doing very well, right? It went up a lot and now it's crashing. You want another example? Look at this. This is another company that is called Ping an is an insurance company. This is traded in the Hong Kong market. That was also doing very well. Now is down around 34%. But if you look before it was, you know, going up well, there were some drawdown, but then it was relatively stable. Then of course Covid affected everyone. But look at the last period. So imagine that the fundamentals are still good and then maybe you start to hear news that oh, you know, for this or that reason you should close your position because. And this is not in your exit rules, what do you do? That's the really what I want you to reflect on and you want to see another example is the Kraft Heinz last year is doing very well. But remember I made a video and I was saying that even Warren Buffett was investing in debt, lost money because it was trading at around $100 and then it went down to 24. Same question, what do you do? Do you still hold because you are confident the company is doing well, fundamentally wise? Or do you start to look for news or other things that can tell you why the company is going down like that and then if you find some reason, then what do you do if that reason again is not part of your exit strategy? Right. Maybe you say oh, because the Chinese market is not doing well. Well, is Chinese market not doing well? For example for the Ping an or other or Alibaba. Is that a rule in your exit rules? Maybe no. Then what do you do? Do you sell or not? Because on the one hand you will say hey, if it's not in my exit strategy, I should not do it, I should not sell. On the other hand you say hey, this is an exceptional event because the Chinese market policy changed, whatever it is, then I should sell. Then you don't know. That's why I prefer to. Of course I can look for strong companies and buy when they are at a discount price. At the same time I also believe that having ETFs like the S and P is very important because the ETF tracking the major markets like the US market or whatever the market, except Japan, that in the long term is not doing very well. But let's say US market just to be conservative and have an ETF that we are confident will always go up in the long term. Or let's not say always. But if you believe that the US market will not collapse, you know that this instrument will be going up in the long term. And of course there can be drawdown. You see here like the COVID and before here we had like in 2007, 8, the other crisis. But this is something where you know that you can keep buying and then the price eventually will go up. But other companies, you don't know, Even you remember BlackBerry. BlackBerry was very popular maybe 15 years ago. Everyone got this BlackBerry phone or smartphone and then. And then the price went almost to zero. I don't even know if it's still listed. So imagine this happened to Apple as well. You think Apple is a great company and then something happened. And then maybe because let's Say that the reason why they go down is because they are not able to satisfy the customer anymore. There are other competitors. All these things are very hard to quantify. So what do I mean by all this? My message is very easy and I will touch on that in next videos. But for now is this don't think that trading is As I explained, there are many drawbacks, but investing is the solution in terms of, oh, we don't trade stocks, we invest in stocks. We just choose fundamentally strong stocks and then we hold them forever. No, because things can change and the problem is to understand how such changes are affecting the long term price. In other words, you should know, but it's very hard if you can still believe the company will do well in the long term or not. And the only way to know that would be to have the crystal ball. But as far as I know, nobody got it. So my idea is to focus more on creating Portfolios based on ETFs based on instruments where if a company is not doing well, it will be automatically kicked out. Of course, this also means that the return you get may be less and probably are less than if you pick the best companies. But at the same time you also can have more safety on the downside. Okay, so what I suggest is that you build your main strategies around ETFs and then you can keep part of your money to invest in stocks. So even if something happen or your company that you think is great actually is not doing so well, even if it's going very, very bad, then you still have the majority of your money in etf, where you have the confidence that in the long term is going to go up. So this is more or less the the content for this video. I just wanted to quickly share about that because I know that recently there have been some companies like Alibaba or others that went down and then, you know, companies that people thought they were strong. So it's always good to keep this into perspective because it's very easy. Again, I want to stress it, it's very easy to sell you a course showing some crazy company like hey, if you buy Apple at this stage, or if you buy Microsoft or Facebook or whatever, but they never show you what will happen if you buy the wrong one, if you bought the BlackBerry company or other companies that were supposed to be very good and then they went down a lot. This is not what they share. So be careful. Investing long term may seem safer than trading, definitely is less time consuming, but at the same time there are also risks. And my way to mitigate this risk is to go with ETFs. So in the next videos again, I will talk more about ETFs. There will be some strategies that I'm implementing. They did relatively well during the COVID situation, and I will share more about that. For now, I think that's all for this video. Thank you again for the support. Thank you again for the 168 subscribers that we reach. Is very good for me to see these numbers, and I really hope that the videos I'm making and I made and I will make can really help you to avoid mistakes that can cost money and also become more profitable. And with that, I believe we can close this video. Thank you again and see you soon.