Last week we experienced a modern-day David vs. Goliath, which pitted the average investor against large, sophisticated hedge fund managers. Investors of the popular online site Reddit joined together to drive shares of Gamestop (GME), a heavily shorted stock.
It caught the attention of Wall Street and Main Street. Fortunes were made, but many more will be lost. Shares are up about 1600%. While it’s quite the return, there are those that will undoubtedly ride it down; hence, it’s what makes a market. It’s reminiscent of the Applebee’s waitress who owned five spec properties during the housing bubble; will we see a similar fate?
The question I’ve been asked by clients is, “What to do now?”
We anxiously awaited the COVID vaccine from Pfizer and Moderna, which brought hope that normalcy will soon return. With interest rates continuing to hover at historic lows, unemployment a concern, cryptocurrencies, deflation, inflation, it sounds like the makings for confused investors. So, what to do?
The answer will shock some; nothing. Don’t get me wrong; I think we will experience some sort of volatility, however, if you have been smart enough to hire good advisors and/or fund managers then let them be nimble. Let them make the moves. Going to cash or chasing the “hot stocks” isn’t a game won by many. Owning great diversified funds that can go to cash and/or own commodities such as gold is my recommendation to clients. I often remind them that dividends are our friends.
While it doesn’t make for great talk around the water cooler (if that’s still a thing), it provides safety and a measure of security in a crazy world. Fortunes can be made by owning dividend-paying stocks and simply reinvesting the dividends. Sure, it takes time but what doesn’t? So, ignore the headlines. Turn off the television and pick up that book on the coffee table. It’s a long battle and only won by exercising two traits we all possess (or have the potential to possess); consistency and discipline.
As Warren Buffet, Oracle of Omaha, says, “Be greedy when others are fearful and fearful when others are greedy.”
Stay safe. Stay sane. Stay invested.
Daniel Tacktill is senior director with The Stanger Tacktill Group of Oppenheimer & Co. in Melville, New York. He was named a Top Advisor by Participant Outcomes (TAPO) for September 2019.
Daniel Tacktill is senior director with The Stanger Tacktill Group of Oppenheimer & Co. in Melville, New York. He was named a Top Advisor by Participant Outcomes (TAPO) for September 2019.
