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I first began taking charge of my investments roughly 16 years ago, in the midst of one of the biggest stock market meltdowns of all time. And as much as it wouldn’t be a pleasant experience, I’d be willing to go through the same thing today for one very good reason.
Let me explain.
The bad ol’ days
Back in 2009, markets were already well on their way to hell in a handcart. Financial apocalypse was upon us.
Of course, we now know that 2009 was a wonderful time to begin investing. In the 16 years since, stocks — particularly those related to technology — have exploded in value. Even the pedestrian FTSE 100 index has more than doubled. And that’s before we add on the impact of dividends!
The direction of my own portfolio has most certainly been up and to the right too. I’d hate to see that change.
Trouble is, that’s exactly what many analysts (and even high-profile CEOs) are saying right now. One can’t move for soundbites about an AI-driven bubble waiting to pop.
No crystal ball
So, when will this reckoning arrive? Ah, that’s the catch. No one truly knows. Even masters like Warren Buffett.
Share prices could conceivably go much higher in value, regardless of what company fundamentals might suggest.
However, it’s probable there will be a (very) painful drop at some point, at least if history is any guide.
It’s not what I want. But it’s what my future-self needs.
Great for Fools
You see, one positive from a market crash is that it gives long-term-focused Fools an opportunity to buy into some of the world’s best companies at lower prices.
An example would be Apple (NASDAQ: AAPL).
Thanks to its ability to attract and keep users into its ecosystem, Apple is now worth almost $4trn. This week, shares hit an all-time high.
Forget 2009, anyone buying five years ago would have easily doubled their money.
Is this justified? Well, Apple is easily one of the biggest and best-known brands in the world. It’s also one of the most profitable, consistently generating fat margins on its devices. This has allowed it to build an incredible cash reserve and invest heavily in AI to build on its already-dominant position.
Nothing’s guaranteed, though. It’s still heavily-reliant on selling (expensive) new iPhones — not ideal in a tough economic environment. The level of innovation is also arguably a lot slower with new products now creating only a ripple of excitement.
And even if Apple does everything right from here, it may be swept up in a wave of selling if investors dump tech stocks en masse.
Just two steps
Since no one knows where we’re going, I’m doing two few things.
First, I’m looking through my portfolio with the goal of ditching any stocks I no longer believe in. This would then allow me to build up some dry powder for less-bullish times.
Second, I’ll form a list of stocks I’d like to own if the price were right. Having done my due diligence in advance, my only remaining task will be to pull the trigger when the time comes. Throw in a dollop of patience and I could be richly rewarded further down the road.
As things stand, that list would include the fruity tech giant.
