A Dip Today, Hope Tomorrow?

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Today’s episode

Good day! ✋ 

Stocks declined this week, especially in the technology and AI sectors. Two main factors led to this dip: an increase in US unemployment and doubts from major investors about AI's potential. Nevertheless, experts maintain optimism about the long-term perspective. The stock market is known for its volatility, but historical trends demonstrate a consistent upward trajectory over time. Therefore, patience and a long-term perspective are essential for investors.

If you missed yesterday's episode, The Investing Wise Academy (IWA) has just launched the IWA Portfolio! What can you expect? We will regularly provide bite-sized but valuable information about our portfolio. If you prefer to follow our trades simply, we'll just share a raw copy of all the trades for our carefully chosen three portfolios. Consider joining our Premium membership. You will have access to our IWA Portfolio, where you can see the daily stocks we trade.

To start, let’s check what’s happening with the market👇️ 

Recently, stocks have generally declined severely as the stock exchanges have opened after the weekend. Growth, tech, and AI-related stocks have been hit extra hard.

Overall, however, the outlooks of most top economists and investment managers remain quite positive.

There are two main culprits behind the drops

The first culprit is a mildly bad US jobs report, showing unemployment rising from 4.1% to 4.3%. This is the fourth month in a row with US unemployment rising.

While the consistent upward direction, month after month, is somewhat concerning, it is important to note that 4.3% is still quite low compared to the 5.7% historical average unemployment rate.

If unemployment rates continue to rise, it could have a negative impact on stocks. However, if it reaches a point where the US Federal Reserve decides it has seen sufficient data evidence, it may loosen monetary policy by lowering the interest rate, potentially causing a quick rebound.

The second culprit is that some of the world's most influential investment institutions have directly stated they do not think AI has any use and that big tech is effectively misallocating capital when investing significantly to build new AI infrastructure. It's taken them some time to get around to this view - and they're now acting on it and reducing their holdings of these assets. I evaluate that they are most likely to be very wrong about that - and will most likely be proven wrong in the long term.

In general, stock market investors have to be comfortable with high fluctuation. Stocks do not provide a stable daily or monthly return but can go up and down significantly, e.g., easily dropping or increasing by 20% in any given month or doubling or halving in price in any given year.

It may likely average out to a strong long-term return over many years. There has never been a seven-year period when stock markets weren't overall up.

If you had invested in the $ SPX500 just before the 2008 Financial Crisis, you would have immediately lost over 50%. However, your initial investment would have more than doubled in value today.

I don't think it is wise to be excited about a 20% return, and neither should one care or feel sad about a 20% loss. It is also not good to switch between being excited or worried about one’s stocks based on whether they have recently gone up or down. It is better to have a consistent level of care to assess risks and expected returns.

Unfortunately, for consistent monthly returns, it may be best to invest in bonds. With bonds, you are almost guaranteed to see positive returns each month, but the overall gain over several decades is likely to be lower. On average, bonds yield a solid 3% real return per year and it would take 24 years to double the investment value.

Historically, stocks have yielded an average real return of 7% yearly. Additionally, I have personally experienced over 25% yearly return. A 7% per year return is equivalent to doubling the value of the investment every decade.

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It is important to start the investment process with a clear understanding of your financial goals and the time frame in which you plan to achieve them. Once you have established this, it should be apparent that the objective is not to "beat the market," but rather to meet or surpass your personal financial objectives. Historically, a diversified portfolio of investments held for several years has been shown to yield higher returns compared to those who attempt to time the market by buying and selling at perceived market lows and highs.

Are you ready to replicate our trades from carefully selected stocks? Check out the newly formed IWA Portfolio! ⬇️ 

IWA PORTFOLIO

Our IWA portfolios consist of trades from our stock basket. We believe in long-term investments and have curated a selection of carefully chosen stocks to create a well-balanced, safe, and profitable stock portfolio. You can access our daily trades from the three portfolios we manage.

• IWA Quality Growth Stocks Portfolio

• IWA Quality ETF Portfolio

• IWA High Dividend Portfolio

The easy way to begin or enhance your investment journey is to learn from what works for others. This section is for you if you want inspiration from an existing investment portfolio.

The IWA Portfolio is only available to Premium Subscribers.

IWA Quality Growth Stocks Portfolio

One of our oldest portfolios, this began during the pandemic. It's where I started paying attention to finding reliable stocks that will safely generate annual profits for me.

Return YTD 13.36%

Return 2Y 71.49%

Profitable Weeks 53.70%

IWA Quality ETF Portfolio

It’s one of the newest portfolios, having just celebrated its first-year anniversary. We are pleased with its progress, as it's safe, reliable, and stable.

Return YTD 11.53%

Return 2Y 44.09%

Profitable Weeks 59.26%

IWA High Dividend Portfolio

I am immensely proud of my holdings, which have grown from a small investment into a strong portfolio of 40 reliable stocks spanning stable industries, focusing on quality dividend growth.

Return YTD 9.38%

Return 2Y 13.37%

Profitable Weeks 57.41%

Portfolio Indicated Dividend Yield 2.67%

Upgrade to Investing Wise Academy Premium to get hold of our stocks!

AI Corner - Palantir ($PLTR) Stock

We are bullish on Palantir, and we believe in the product and the value of the company. So, we have been updating Palantir for the past weeks, leading to the Q2 earnings release.

$678M REVENUE BEAT ✅

27% YOY GROWTH ✅

55% US COMMERCIAL REVENUE GROWTH✅

24% US GOVERNMENT REVENUE GROWTH ✅

83% US COMMERCIAL CUSTOMER GROWTH ✅

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Remember: Investing is a journey, not a destination. It's about making informed decisions, managing risk, and staying committed to your long-term goals. So, take the time to research, experiment, and find the perfect recipe for your balanced portfolio.

If you want to learn and strengthen your investment portfolio, we have 9 steps to help you avoid an investment meltdown. Check out the 9-part series here. 👇️ 

Cheers to wealth, wisdom, and a dash of madness!

The Investing Wise Academy Team

Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor before making any investment decisions.

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