Specific tech selloff phenomenon and how to deal with it

By | CYH

I always held the belief that a tech selloff would trigger a market wide selloff.

But I was wrong. The selloff recently has been specific to tech stocks and value stocks in fact came back to life.

Many talked about value resurgence (many also said value was dead) but it is still surprising how the tide suddenly turned. Yesterday (8 Mar 2021) nasdaq was down 2% and dow jones was up 1%. A very unusual anti-correlation. Maybe it is still too early to say value is back as market can surprise us again.

This is why you cannot extrapolate history (recency bias) to buy what has performed (performance chasing). Valuation cannot be disregarded totally. Always respect risk.

Second is that the market always surprises. Stop thinking that you can predict future moves accurately and based your investment decisions on prediction alone. Especially sometimes we are not even predicting, we are merely painting a picture of the future which we hope it would happen.

Since we can’t predict, that’s why I prefer to just hold both value and growth stocks even either one could have been underperforming. Also use a barbell approach where most of the capital are invested in highly disciplined stock picks while maintaining a small portion to speculative high payoff plays (crypto did well but SPACs were spanked).

Lastly, our investment value is going to go down at some point in time. Being long term investors, holding power is often overlooked and underrated. Buying stocks is easy. Holding them long term is difficult. Because we tend to use share prices to judge if we have made the right or wrong picks. The challenge is sometimes you may buy a good stock but the share price went down while you may also make money when buying a lousy stock. But the share price movements offer poor feedback loop in the short term. Focus on the underlying business or asset instead. Because these are what matter in the long run.

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