Update: Recent market volatility is a test of patience

The market is undergoing continuous volatility, specially the tech and high growth stocks were hammered

The market is undergoing continuous volatility, specially the tech and high growth stocks got hammered. These are the stocks we usually invest in our Portfolio 2020 and Portfolio 2021.

After falling 1.4% yesterday, the nasdaq was down another 1.5%.

Definitely our portfolio's is taking the heat and we are not alone, it's entire market. The key differentiator in upcoming months would be long term vision and hold our high conviction stocks strongly. We lost our profits, but the loss is not a loss until it is booked. Just imagine what has changed from last week? Our companies would still be doing good in near future, they will keep getting business, they will keep innovating and generating profits, increasing revenue and grow more.

Our Portfolio 2021 is down 2.99% today and now we are sitting at 13.22% unrealized profit down from recent high of 32%, quite a drawdown but we anticipate we will win back our profits again, because we remain confident about portfolio and the stocks we hold.

If you have followed my comments from the past two months, this volatility was anticipated and the correction was bound to happen.

I have reminded in the past that occasionally book 20% of profits so that you have some emergency cash for such situations and we can buy more of our high conviction stocks. Also never use Margin Money or loaned money, markets like today will force you to sell your holdings to cover margin calls. Only invest the money that you don't anticipate to use in 1-2 year period.

It could be likely that the selling is not done yet in the short term, personally i am not worried for our portfolio, I do personally hold these stocks in my portfolio as well and it's not a good feeling to see our profits wipe out in few days, but hey!! we are here for long, this correction would just be a blip in the market after few months.

We own many best stocks in the market that institutions and hedge funds always eager to buy on weakness. The stocks we hold will be huge winners in time.

To conclude the best strategy today would be to hold on to our stocks, volatility and correction is part of investing. As profits comes, loses follows as well. We can't just have one sided market that always goes up. Correction the sign of healthy market, But to be vigilant always keep these things in mind.

Rules to follow:

  1. Book 20% of profits, when you feel very good about your portfolio. It's the sign that you achieved what you planned and it's time to raise some cash.
  2. Keep adding money to your brokerage account monthly, but only the money that you don't plan to use in 1-2 years.
  3. Never take loan or use margin money for long term investing.
  4. Market always come back, so would your gains.
  5. Correction happens it's a sign of healthy market.
  6. 30% of market corrections are very rare and happens only once or twice in a decade. Generally 5%-10% correction happens twice a year
  7. Holding on to strong, great and visionary companies is the key to long term investing.
  8. Never panic sell, apply 3-day rule. Meaning wait for at-least 3 days before selling your longterm holdings.
  9. Sometime best strategy would be just to not look at your brokerage account for a week or two.

Hold strong fellow Alpha Investors!

-Alpha Staff

Note: I don't recommend to use stop losses because most of the time it works against us. For eg today 1st hour the market was down a lot due to panic sell, but later it recovered somewhat. If you would have used stop losses, you will loose the opportunity of recovery. You can use stop loss if you want to get rid of the stock, but not for your winners. Never.

Note for Options holders:

All the options we hold got crushed due to this volatility. In some we lost our profits and in some we are down a lot. We are also personally down 11% in our options portfolio.

Except UBER and SNOW that has expiry in March, other options still have lot of time left so we are NOT selling for eg PTON, PINS, APPF, CMPS, SFT.

We anticipate SNOW can recover before earnings. We might have to sell UBER calls in loss. Our first loss in last 4 months.

Market always comes back up
Last year we saw the biggest drop and the biggest rally. Many investors made windfall by staying in the market and buying the stocks when there was blood on the streets.
Alert: Don’t panic sell, but book profits
As we stated in our watchlist post yesterday, that you should be cautious in Dec for taking any long positions. Today we are seeing a large sell off in tech.

Subscribe to Alpha Investor

Don’t miss out on the latest issues. Sign up now to get access to the library of members-only issues.