As high inflation rages and investor jitters shake the markets, what can you do to better fortify your portfolio? in this segment of Backstage pass, recorded on January 5dope contributors Rachel Warren, Trevor Jennewine, Jason Hall and Jamie Louko answer questions from members, discuss their approaches to investing in the current market environment and the value of portfolio diversification.
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Rachel Warren: We have a few questions here from Vihaan. One said: “My portfolio is made up of growth stocks, Motley Fool sees a drop of around 22% in three months. What would you recommend given current market trends? Should you look into different sectors, REITs, dividends, value stocks? Are you changing your approach to new capital or are you continuing to add growth stocks as they are beaten?
Want to share your thoughts on this? Anyone does not hesitate to get started.
Trevor Jennewin: Sure. Vihaan, I think you’d have a lot of different answers to this, so maybe we can each add a few sentences here. But I will not change my strategy.
I’m in a similar boat. My portfolio is down 18%, 19%, which is good. I have plenty of time before retirement. I’m always looking for those high quality stocks that I can hold for 20 years.
The short answer is no, I’m not going to change my strategy. I’m accumulating more money on the sidelines right now.
This ties in with another comment. It’s hard to know when to buy and I don’t think any of us know where the bottom is. I never deploy all my money at once. I just bought while going down in intervals. This is my point of view here.
Jason Hall: Jamie, step in and I’ll follow up.
Jamie Louko: No. Trevor took the words out of my mouth. I’m in a very similar boat. I don’t change anything. I will continue to buy stocks. I like high quality falling stocks.
Room: I think your investing style has to, you have to have a philosophy that matches your long-term goals, but also your psychology. But it should be something you are comfortable with.
It needs to be something that you can repeat over time and not let your emotions take over. I think that’s really super important. FoolFan, yeah so the idea, can the drop continue? Talking about a lot of stocks are down 50%.
Absolutely it can. [laughs] I mean of course. How many times has Amazon fell, 80% since it went public, like six or seven. They didn’t all happen in the first week it went public. I mean, a lot of them happened 10 years, 15 years after the company went public.
Absoutely. Your time arbitrage is how you make it non-risk for yourself. I call it — now I can’t even remember what I call it — precision error. You try to catch the perfect prize.
You will never get the perfect price. Invest at a price that suits you, which you believe can generate significant returns later on when you reach your goal. I think that’s all you have to do.
Next, to the question about your philosophy and your style. Maybe a mix, maybe that’s what would be useful right now for anyone really heavy on tech stocks.
If you’re really struggling to look at your portfolio and see how much it’s fallen recently. Maybe some balance and owning REITs, owning dividend pillars to give you some balance.
As Andy Cross calls it, like these equilibrium stocks like the Berkshire Hathawayand the Home deposits, and real estate companies, that sort of thing. This may help you out, because your entire portfolio won’t be down 22%. So few different things to think about.
Jennewin: I’m going to jump in and add to what Jason said. I’m not fully invested in tech stocks. I have REITs in there, dividend payers, so I think that’s good advice.
Warren: I think that’s also why it’s so important to have a well-diversified portfolio. Even if you like tech stocks, or if you’re like me, I love healthcare stocks.
I try not to focus too much on any particular stock or sector. But I also think, like you were saying, it really comes down to what you’re comfortable with.
If you’re buying stocks that you intend to hold for many years at a time and aren’t so concerned about those daily declines, now may be a great time to keep buying big companies that are trading downside, and just be aware that it may take some time for your portfolio to reach that long-term growth trajectory.
On the other hand, you can also take advantage of this opportunity to invest in more traditional value stocks and in sectors that are often less affected by these types of market movements.
I can say for myself that most of the tech stocks in my portfolio are down right now, while my healthcare stocks are doing pretty well.
So that helped to really balance out my holdings and some of the volatility I saw there.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Jamie Louko owns Amazon and Berkshire Hathaway (B shares). Jason Hall has no position in any of the stocks mentioned. Rachel Warren is the owner of Amazon. Trevor Jennewine owns Amazon. The Motley Fool owns and recommends Amazon, Berkshire Hathaway (B shares) and Home Depot. The Motley Fool recommends the following options: long January 2022 $1,920 on Amazon, long January 2023 $200 on Berkshire Hathaway (B shares), short January 2022 $1,940 on Amazon, short January 2023 $200 on Berkshire Hathaway (B shares ), and short January 2023 calls of $265 on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
