The markets today, viewed several hours before opening, appear likely to continue the slide of recent days.
Much of it started with the stock splits of Apple and TESLA, explains Jay Nash, Senior Vice President and Portfolio Manager at National Bank Financial in London.
The slide reminds us of several investment concepts. My personal favorite is that the first goal of investing is not to make money. That’s the second goal. The first goal of investing is not to lose money.
It also reminds us that taking a profit when a share price reaches the ‘too good to be true’ level can be advisable. Yesterday alone, TESLA dropped $88.11 – that’s a 21.6% drop and that’s over and above last week’s drops.
TESLA’s gyration also reminds us that market volatility is here to stay. The causes of TESLA’s volatility range from over-valuation to the announcement of a new $5 billion share float to GM’s decision to take an 11% stake in rival electric truck manufacturer Nikola. TESLA’s failure to get into the S&P 500 index accounts for some of the drop.
Recent events also serve as a reminder of the need for diversification, between sectors, fixed income and cash.
What happens next? Amongst the possible outcomes could be a style rotation from growth to value, Nash says.