Friday Feedback: The “Risk Tolerance” Edition
Welcome one and all to the Greatest Show in Finance!*
(* Your results may vary. Terms and conditions apply. See the back of the cereal box for details.)
It’s Friday Feedback day here at Great Stuff. Today’s the day that we dive into the Great Stuff email inbox and answer your stock market, investing and assorted other questions. It really is like a box of chocolates: You never know what you’re gonna get.
But you can help direct the conversation by writing in with your own questions to GreatStuffToday@BanyanHill.com. We take all kinds here … and there are no dumb questions, only dumb answers … provided by yours truly.
Today, we’re learning a lesson about risk tolerance and money management — an important lesson indeed, considering the degree of volatility Wall Street is potentially looking at for the entirety of 2022.
With that in mind, pitter-patter … let’s get at‘er!
Nice calls. Nvidia down $17, Coinbase down $17. Are you sure you’re not Jim Cramer’s alter ego?
— Gary K.
Happy new year, Gary! Thank you for writing in.
Jim Cramer’s alter ego? That’s a good one. I guess I am in the “financial entertainment” business here, aren’t I?
I mean, I can’t call myself the Greatest Show in Finance* and not admit that part of the reason I do this is to make you laugh while the market is making you cry.
We all need a little levity from time to time, though I’d like to think I don’t go as far as smacking buttons for sound effects … OK, we all know I would if I had them. Never mind…
But, Gary, I noticed something a bit unsettling in your email. A couple somethings, actually, that have nothing to do with Jim Cramer.
First, the four Great Stuff picks for 2022 are just that: Four picks for the entirety of 2022. The last time I checked, 2022 still had about 358 days left — or about 249 trading days.
Your email arrived the day I recommended Coinbase (Nasdaq: COIN) stock, and the day after I recommended Nvidia (Nasdaq: NVDA) stock.
I know that time is an illusion — lunchtime doubly so — but, dude, lay off the caffeine. Instantaneous gratification isn’t a thing in the market unless you’re very lucky or a Congressperson or a Senator trading on insider information.
There’s a rule of thumb every investor should know before buying anything: Expect the stock you just bought to drop anywhere from 5% to 10% after you buy it. If you can’t tolerate that much risk in anything you invest in, you shouldn’t be investing in the first place.
Furthermore, you need to have patience. The drivers behind the stocks I recommended are all solid and based on the companies’ revenue growth, market presence, market dominance and potential to take full advantage of where the broader economy is moving.
They will take time to fully develop, but develop they will.
If you’ve done your homework right, this is how all investing works: Research, invest, ignore the broader market’s gyrations, hold for profits.
Second, Gary, I noticed you listed NVDA and COIN’s declines in dollar amounts. That’s very disconcerting.
Since I recommended them, NVDA is down about 6%, and COIN is down about 1.3%. Though, to be fair (♬ to be faaaaaaaair ♬), COIN was down about 3.8% the day you emailed — which also happened to be the same day I recommended COIN stock.
Note: For Great Stuff Picks portfolio tracking purposes, the official entry price for any position is the closing price on the day after the recommendation is issued. This is because Great Stuff typically arrives in your inbox after the market has closed, and some of y’all don’t read until the next day anyway.
Now, I’m not trying to make light of a $17 decline in a stock, but such a drop is well within the expected loss immediately after entering a position.
But what really concerns me is that you’re tracking your positions in dollar amounts, not percentages.
What this tells me is that you are very concerned about your holdings at a dollar level. This isn’t necessarily a bad thing, but it does give insight into your investing thought process.
Losing $17 on NVDA or COIN — both of which are trading in the $200+ range — isn’t all that bad. Both stocks can gyrate that much up or down in any given week. This is volatility. But losing $17 on a stock trading in the sub-$50 region can be devastating and represents a massive amount of volatility.
On one hand, you have a 2% to 6% loss. On the other, you have a 30% to 50% loss. Clearly, one is within acceptable and typical risk tolerances for investing, while the other is just right out … despite both being $17 losses.
This is why investors use percentages instead of dollar amounts when trading returns — it gives a clearer picture of your investments.
Now, I suspect, Gary, that you just wanted to vent your frustration at what is clearly a broad, market-driven decline that has nothing to do with either Nvidia or Coinbase’s business models or revenue prospects.
On that front, I hear you, man. The market be a bit crazy right now, that’s for sure.
However, if a $17 loss two days after investing in a stock bothers you — and that $17 loss is only a 2% to 6% decline — you might not have enough investing capital to participate in these trades. Honestly, I don’t know your risk tolerance or your capital available for investing. How would I?
I can’t manage your investing portfolio for you, Gary. I can only help guide you toward investments that have the potential to make you gains over time. The rest is up to you.
That said, if NVDA and COIN are down 3% or more by the end of 2022 — you know, the time frame I laid out for these investments? — then you can come at me with that Jim Cramer BS. I’ll deserve it.
Until then, thank you for reading, Gary!
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This is it, Great Ones, don’t back out now! The last roundup of rip-roaring Reader Feedback … until next Friday, at least.
If you don’t see your name in bright, bold virtual print below, you might’ve forgotten to write in this week. Let’s remedy that for next time, shall we?
Share your thoughts, questions, rants and raves in our inbox: GreatStuffToday@BanyanHill.com. We’d love to hear from you! Now on to the show.
Both Sides Of The COIN
Big guy, yup, I do use Coinbase. They have listed many many coins recently. When they went public they only had around 30 coins on their exchange and they needed the twitterati to help get new coins listed. I’ll say for the 85% it’s a good platform. I also use Voyager, Crytpo,com, Phemex,BitMart, 1inch,Binance, CoinbasePro,and a few others I can’t remember right now. They all have advantages and disadvantages. I’m sure every crypto trader will say that.
I’d also like to correct you. You can invest in BiNance by buying their coin which for those who bought in early turned out to be pretty pretty good doing my best Larry David. If anyone wants to start in crypto it’s a great platform. They have information and tutorials not on others and you can even earn over $40 in free coins just by taking quizzes that you can’t get the wrong answer to.
I’d tell anyone just using Robinhood and wanting to head for deeper waters that Coinbase is where to go. Well that’s my 2 cents. One present I received for Xmas? A Heatmeiser T-shirt from my daughter! I also had the aluminum pole set up every year too! Still biggest fan! ROLL TIDE,
— James S.
Any of y’all out there who wonder why James S. here is the reigning Great One when it comes to crypto commentary … now you know. Thanks for writing in, big guy! (That feels weirder when I say it…)
We’ve had a number of you write in to share your crypto thoughts since our big Coinbase buy on Wednesday — including good ol’ Gary up there.
As expected when talking about these ephemeral Ethereum exchanges, the “OMG scammers!” crowd has been summoned. And since this Friday Feedback is basically turning into the Rough Guide To Investing … here comes my “be safe online!” addendum.
If you’re signing up to trade crypto … you need to do your due diligence on the trading platform as well as the actual coins you’re buying. James, I know that you did your due diligence before signing up on the bajillion platforms you listed … and I have the emails to prove it … somewhere.
That said, even if you trade on a reputable crypto platform, keep your security tight. Don’t just send off your precious private info into the digital abyss all willy nilly, now.
My point is, Great Ones, be careful out there no matter where you invest. If you’re venturing into the crypto waters, you don’t have to go it alone — find yourself a ready guide in some celestial crypto voice.
If I Had 20 Million Dollars
You are the funniest financial newsletter out there. But you outdid yourself when you said Elon’s goal is to reach $20 million annually in vehicle sales in 9 years. Do you seriously believe the mighty Elon can sell a vehicle for a full dollar, albeit in 9 years?
— Jay C.
Jay-C., I’m familiar with your music … Magna Carta was a pretty good album, but I personally prefer your older stuff circa 1996. Or, maybe, The Grey Album from 2004. Just sayin’…
I kid, I kid. In fact, I kid so much that we sometimes don’t even realize we’re joking — like in the snippet of text you selected there. You have found a flub, plain and simple. Or if you’re a glass-half-full kinda guy, you stumbled on yet another Great Stuff Easter egg — congrats, Jay!
Tesla (Nasdaq: TSLA) expects its sales VOLUME to reach 20 million annually in the next nine years. That’s 20 million cars a year — not $20 million a year.
For reference, Tesla’s already reported $46.8 million in sales for 2021, so a goal half that amount is admittedly moot … or, as Elon would put it: “Secured.” As for Tesla’s actual target of 20 million cars every year, well, I guess the Big Red T better find a secret stash of those oh-so-elusive chips — fast.
Besides … nine years? That’s like a dozen Star Wars spinoffs from now. Who wants to wait that long to maybe reach their goals (revenue or otherwise)? Gary clearly doesn’t.
And if you’re anything like Gary, you want the chance to make money each and every week … and that’s where Wednesday Windfalls can help.
Every Monday at 2 p.m. Eastern time, my colleague Adam O’Dell sends his readers a new trade alert … which he then closes out of just two days later like clockwork.
Adam’s gearing up to send another trade out this coming Monday, January 10. And if you act right now, you can get it sent straight to you.
Click here now for all the details.
Plug In, Plug On & Plug Out
This goes out to all of the Pluggers. PLUG has lost about 50 percent of value in the past month and a half, for no good reason, unless you consider negative market sentiment, fear, and ignorance good reason. I plugged back into PLUG this week at what I consider to be a fire sale price.
Those of you that unplugged or those that have not plugged in should consider buying in soon. PLUG continued to expand its worldwide footprint and release positive news during the descent and will continue to grow. This is not a short term investment, but will be a long term winner.
— Dick K.
You hear that, all you … um, Pluggers … out there? Shudder.
Ugh. I don’t think that name’s gonna stick, Dick. But thanks for writing in with your best Mr. Great Stuff impression … again.
In short, Dick’s right … again. The not-as-short answer is that, yes, thanks to recent market volatility and investors’ sudden skittishness this year, Plug Power (Nasdaq: PLUG) has been unfairly beaten down over the past week — erm, make that the past month or so.
If you already hold PLUG, I bet you’re acutely aware of this fact and loading a new tranche in your position, depending on that whole “risk tolerance” thing we talked about earlier.
If you’re not already holding PLUG, well, what are you waiting for?! You heard Dick’s unofficial buy recommendation — listen to the man!
Are you yourself holding out for a PLUG rally? What do you predict will happen in the stock market in 2022? Get bold with your hot takes, and get to prophesizing in our inbox!
By the way … love the warm wishes and predictions, Farhad T., Wayne H., Bill B., Dan K. and bddski! Keep ‘em coming. And who knows? Maybe next week’s Friday Feedback will be Great Ones’ picks for 2022.
We’ll see how your predictions stand up to mine. You game? Let’s go!
Hit us up at GreatStuffToday@BanyanHill.com. In the meantime, here’s where you can find our other junk — erm, I mean where you can check out some more Greatness:
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Until next time, stay Great!
Editor, Great Stuff