The Investor Diary Entry #27: April 6, 2023
Many investors have a question that troubles their minds and ruin their days, and that question is; if the market will crash soon. True that many investors worry about their portfolio to lose value through a market crash. Other investors are waiting for the crash, and morning good news for them is the slashing of a stock price that they want to buy.
The other day I was watching a YouTube for two of those investors. They woke up that morning on the news that Ali Baba stock just went up. I think they both have positions in Ali Baba, but they wanted more of the stock. They woke up to this news which meant for them that their wait for a value price of their choosing will be prolonged.
Those are value investors.
Being A Value Investor
Being a value investor is really fun. I looked a little bit at the growth investment methodology. It took me few weeks to realize that this methodology is not for me. The most important reason why I didn’t like the growth methodology is the answer to the question of who decides if this stock is a growth stock or not.
As opposed to whether a stock is a value stock or not, the growth stock question is decided by some experts, analysts, and specialized websites, or at least this is how I feel a stock is tagged with the description or a tag of being a growth stock.
A value stock, on the other hand, is tagged by such a description by the individual investor. Even if the price is at a value level or not is decided by the investor. In many cases I read or hear that a certain stock has reached value levels. I go and make my own assumptions and calculations to find out that for me the stock is still not at a value level and the current stock price based on the projected revenues and earnings and some other factors is not where I am interested to buy this stock.
Waiting for the Crash
A value investor waits for a stock until it reaches a level where he/she considers it at value. Therefore, the wait is for the stock price in question to fall.
Any investor has a watchlist made of multiple companies with notifications triggered once a certain stock reaches a certain price level. This happens on one stock at a time basis.
When a crash happens, the value investor finds most, if not all, the stocks on the watchlist lighting up like a Christmas Tree. For me, especially that I still have about 40% of the investable capital in cash, a crash would present many solid opportunities.
The Difficulty within a crash is deciding when a crash is about to end, but this is normal as many investors think that they can time the bottom of a market during a certain time frame. For a value investor, it is buying for value not trying time the bottom of the market or the crash when it happens.
The Yen And Yan of Market Crashing?
May be not. I am one who thinks that the market will most definitely crash, but even I have some arguments against the market crash.
The way I play those things in general is even though I believe that the market will crash I keep an open mind a chance for the other alternative to happen.
While believing that a certain outcome is the result of the current conditions, I also make moves as if this outcome is not happening at all. It is like hedging securities. I also hedge the way I draw conclusions.
Crashing With Holding Small Cap Stocks
Small caps are risky in normal conditions. Holding small cap stocks during a market crash is something that I have not read about, nor have I heard anyone talking about the possible outcomes of such a portfolio.
The small cap stocks that I hold within my portfolio is not only small cap, but also stocks that are within new industries. Industries that are not making any money yet. I am talking about Drone manufacturing, Autonomous driving and Hydrogen exploration and production.
Yes I am excited about the potential market crash, but I really don’t know the effect that it will have on the small cap stocks that compromise a great portion of my portfolio.
Conclusion
I am sure that this article might seem insensitive or even some might see it as insulting when I talk about my excitement about a coming crash. How I am talking about it as if it is a fun thing.
It is not a fun thing, I am afraid. Very bad consequences will happen during a market crash. It is not called a crash for no reason. A crash is something bad. In this article what we are trying to say is that there is a way to take advantage of a crash.
A crash of the market can mean a sale in stocks. Therefore, instead of being fearful, you can study the situation and see how you can come better after the crash than before the crash.
I am glad that I am reading my own words. I need to see and hear those words to be able to implement them.
The Investor
Thursday 6 April 2023
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second as a place that I can share my ideas publicly hoping that others will share their ideas and learn from each other, and lastly as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking those links I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
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