On the other hand my girlfriend took positions in AirBnB when it was down and serendipitously in NVIDIA, just before the AI reports sent it skyward, so it's not all bad news.
Perhaps the pertinent question is one of these: If you had the position's worth in cash instead of shares, would you buy? If not, why hold? If you had bought at 10% instead, i.e. you'd be up 100% today, would your decision be any different?
What I'm aiming at:
Your question is probably much more a psychological one than financial, as was your decision to buy. The past is done and can't be changed, anchoring your decision to sell to your purchase price is an (extremely common) error. I try to show that with the questions above, if a different anchor leads to a different decision, without regard to the company's prospects, something's seriously off. The answer to your question, your exit criteria or strategy for any single company, should be part of the decision to buy and get revisited regularly.
Unless you are in your fifties, put your money in and forget about it until you get to that point.
But my dilemma is this. The shares are now worth a fraction of what I paid for them. I was looking for a long term investment and interested in AI. I knew at the time that it was a high risk investment. The company is now considered a sell by the online advice available, even at the low current price. I wanted to see if the EF opinions backed this up.
It is a psychological barrier for me to write off the loss as I do not need the money
If you don't know why you are there and don't know what to do next, the answer is always get out. Put your money in a fund, it will probably do better that anything you'll do with individual stocks.
Unless aiming for dividends? I imagine the stock price fluctuations doesn't matter when one is aiming long term on dividends
Yeah, I have to check it. It was my gut feelings move, but it was meant to be ~3 months, but later I've still have seen all the bad news, so I decided to stay with "safe" money until it clarifies...
You might find this thread interesting:
https://www.englishforum.ch/finance-…nvestment.html
I believe that additional pillar two payments are even better than pillar 3.
So, people asking investment questions here are usually not financial experts (otherwise they would not ask them here).
I'm one of these persons. I asked in another thread a question about investing in real estate abroad and was brought down pretty quickly.
But maybe I asked in a wrong way. I have more thoughts in my mind, but for the sake of clearly formulated question, let's do it like this:
A specialist earning decent buck (but not crazy) wanting to invest for the long term (over 20–30 years) and not willing to make a lot of footwork in terms of juggling investments actively or getting there much deeper with learning.
What's the most effective long-term earning option for the person with this profile?
Is there a one clear answer to this question with which we can all agree? Is it ETFs?
It’s a great question and doesn’t have a simple answer unfortunately. Jim has a hatred of real estate for good rational reasons, but markets haven’t always been rational and people have made out like bandits. The corollary of this is to quote Keynes that the market can remain irrational longer than you can remain solvent.
Over a long term horizon equities have outperformed other publicly traded securities, but have more bumps along the road (so called volatility). Past performance is not indication of future performance, but we’re all human and it’s the best we have. Some people can cope with the volatility, some can’t. How would you feel if your money was worth 15% less next year? Some people can afford it, some people can’t. Can you afford to lose 15% of the value in a year? Those are the two basic questions that you need to ask yourself. Or would you beat yourself up if your money were worth a penny less the next year/can you afford for it to be worth a penny less.
Most people are on a spectrum between those extremes. You need to work out where you are. Once you’ve done that, you need to work out the most efficient way to invest. There are three main drags on investment performance: taxes, management fees and transaction fees. You want to minimise all of them.
Depending on your position on the risk tolerance/capacity spectrum and given you want to be a passive investor, the most liquid, low fee, tax efficient in Switzeland hands off investment is going to a world tracker like VT. I’m going to link the Swiss Mustachian blog because it covers these topics in more details than I have the motivation to do https://www.mustachianpost.com/blog/
Next question is when/how to buy. The literature marginally suggests that lump sum investing is better than buying on a regular basis, but there’s not much in it. Personally, I think if the commissions you pay for buying can be minimised or equalised, it’s better to put some money away every month.
Final point: An ETF is an exchange traded fund.That means that you can buy and sell parts of the fund at any time the exchange is open. Theoretically this means you can buy and sell any time the exchange is open, but buyers need sellers and vice versa. In stressed times you may not be able to do either. There are all sorts of ETFs from simple indexes to god knows what. You can buy an ETF that tracks the FTSE100, but you can buy an ETF that returns 3 times the negative performance of the S&P 500 or one that invests in dividend stocks or one that only invests in climate friendly companies. Like anything in the financial world, they can be an answer, but you need to understand the question you asking.
I am aware of Mustachianpost, trying to make more sense reading this and actually get a bit deeper, but I would still try to simplify the case.
Let's remove the volatility tolerance from the equation. Let's assume that it is the investor task to become mentally resilient about the risk and that he is managing his life in the way that he doesn't need to take out invested money before its time.
So, our virtual guy:
- has very high risk tolerance
- wants to buy and hold (passive investor, no constant monitoring)
- doesn't want to build more knowledge about financial instruments
- invests for the long term (20-30 years)
I believe this makes the case simpler. The guy wants to multiply his money as much as possible in the long time-span with not too much of juggling (and will tolerate high volatility).
What would be the most effective instrument in this case? You mentioned equites in terms of high risk tolerances. I understand you meant stocks by that. If yes, then is it really a passive solution?
Edit to clarify for Hampi: "passive" here above is meaning "buy and hold" approach...
Actively managed, the fund manager will buy and sell all the time based on the investment parameters of the fund, just as any other investment fund manager would.
In my opinion, a global tracker like Vanguard VT. Note that you will have FX conversions to factor in, as it is a USD fund.
Just seen your edit: Under your definition of passive, yes you buy the ETF now and you hold it until you decide to sell, collecting dividends along the way if it is a distributing fund and buying more as you wish/can afford.
Fast forward to today. Through good times and bad our portfolio has still produced over the last 28 years an average 4% dividend yield – on market price. The dividend yield on cost is much, much higher. As ETFs became a thing I gradually moved out of individual stocks into 4 “core” ETFs.
IUKD – Top 50 UK dividend payers
SEDY – Emerging market dividends
IDVY -Top 30 Euro dividends
CHDVD – Swiss dividend payers.
About 80% of my equity holdings are in the above 4. The remaining 18% are in thematic ETFs such as Renewable energy, Global tech, and commodities. I have 2% ‘casino money’ to place in shit or bust punts.
Our goal (we’re in our 50s) is to turn off dividend reinvesting and stop adding new money and simply live off the income – leaving the principal sum as an inheritance for our 3 kids.
Is this a good strategy? Well, I don't know but it’s worked solidly for almost 3 decades. Over the years I’ve had a lot of criticism from people who definitely know better than me about equities but these people were vibrating with anguish during downturns and these same people also have to look at the Tesla stock 10 times per day on their phone. I don’t. I focus on my family and business, go to bed, sleep and wake up happy. YMMV.