The Investing Highs And Lows Of 2021
Any way you look at it, 2021 was an eventful yearfrom a new president to new virus variants to new all-time highs for Bitcoin and the S& P 500 . We even saw the rise of a whole new asset class: non-fungible tokens, or NFTs, with annual trading volume between $22 billion and $24 billion this year, up from only $100 million last year.
Based on our own data analytics, readers of the Investor Alert and Frank Talk were most interested in stories on gold mining, precious metals, natural resources and emerging markets . But there was also interest in macroeconomic topics as well as Bitcoin and cryptocurrencies.
That said, below are what I believe were the biggest investment stories of 2021.
All At Once Or A Little At A Time Follow This Road Map To Decide How And When To Invest A Large Sum
Ive just received a large sum of money. Is now a good time to invest? That is one of the most common questions I receive from clients.
Determining the optimal approach for investing a large pool of cash is always challenging. The fact that markets are trading near all-time highs can further exacerbate this predicament.
The concern of buying high and the potential for the market to have a change in fortune at the drop of a hat, as we experienced last year, is very real. Below are points to consider to help investors implement a prudent strategy in todays volatile market environment.
What Should You Do When The Market Swings
If youre investing for the long-term in low-cost index funds and other total-market funds, then its really quite simple: Experts say you should do nothing.
You cant control the market, but you can control your reaction, says Marc Russell, the personal finance expert behind BetterWallet. You cant beat index investing. Long-term, boring strategies that work every single time is where I focus my attention.
And if youre investing for the long-run using these boring strategies, then try to ignore headlines about the stock market dipping or gaining, because short-term volatility is the price you pay for long-term portfolio growth.
In the news and pop culture, we hear a lot about the crashes, so theres the concept of the market displaying a zig-zag, says the investing expert behind Personal Finance Club, Jeremy Schneider. But its always going up, maybe three steps forward, one step back.
In the long-run, the market is always going up, which is why the earlier you invest, the more money you have the potential to make. Despite periodic but temporary downturns, major indexes like the S& P 500, the NASDAQ Composite Index, and the Dow Jones Industrial Average have steadily increased since they were created decades ago.
For example, while the S& P 500 has had occasional down years, its delivered an average rate of return between 6 and 8% over the past nine decades. And there hasnt been a single 20-year period in which it has posted negative returns.
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Is Buying Stocks At An All
No, its not a good idea, which should surprise no one.
The fact that it is a GREAT idea, well, that should surprise everyone.
Most investors fret when markets hit new highs, but should they?
The below is inspired by our friend , who examined the following query:
What if you bought stocks at all-time highs, otherwise you sat in the safety of government bonds? Jake found that it turned out you actually OUTPERFORMED just sitting in stocks all the time. Say what?
So, we decided to take the study all the way back to the 1920s.
And it turns out, its a pretty damn good strategy. Better returns than just stocks, lower volatility, and WAY lower drawdownsagain, all you do is check at the end of each monthif stocks are at all time high, then you invest in stocks for the next month, and if not, then bonds. Thats it!
After lots of disbelief on the intranets, I went and checked my code and it looks fine to me. So, I wanted to check it against lots of other assets such as commodities and real estate. The results below are confirmingand the best part is youre only invested about a third of the time in each asset.
High Growth And Immense Profitability Make Synopsys A Stock Not To Miss On Its Way Up
Synopsys, Inc provides a platform on which engineers design and test integrated circuits, commonly known as “chips,” among other software applications. The company has been public since 1992 and has grown to be one of the largest software companies in the world.
If you have been shopping for a car lately or just driven by a dealership with a half-empty parking lot, you know that there is a severe supply shortage of automobiles. The reason for this is simple: They cannot source enough chips to make new automobiles. There are dozens of chips in new automobiles, on average, and this number will only grow with increasingly “smart” cars. Both General Motors and Ford have temporarily halted factory production at various times during 2021 due to the shortage.
Synopsys doesn’t make the chips it makes the software that chip makers use to design and test the chips. Synopsys is also a play on the explosive growth in the artificial intelligence market. The company estimates the AI market will grow to $72 billion by 2025, and AI developers rely heavily on technology from Synopsys. The demand for the company’s services has likely never been stronger as the company is essential to alleviating our current shortage, and its technology is crucial to the future of AI.
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Start Sip In Mutual Funds
For the first-time investors, trading in the stock market can be tricky. If that is not your ball game, then go for equity mutual funds. Equity mutual funds give similar kind of investment experience although with greater diversification and professional fund management. You may think of starting a Systematic Investment Plan in equity funds. In this, you will be placing smaller bets in a consistent manner. Over a period, it will give you the advantage of rupee-cost averaging.
Time Not Timing Is What Matters
Investors learning how to invest in the stock market might also ask when to invest. Knowing when to invest, however, isnt as important as how long you stay invested.
Trying to navigate the peaks and valleys of market returns, investors seem to naturally want to jump in at the lows and cash out at the highs. But no one can predict when those will occur. Of course wed all like to avoid declines. The anxiety that keeps investors on the sidelines may save them that pain, but it may ensure theyll miss the gain. Historically, each downturn has been followed by an eventual upswing, although there is no guarantee that will always happen. Trying to avoid risk could itself be risky, since its impossible to know when to get back in.
The chart below shows two hypothetical investments in the S& P 500 over the 20-year period ending December 31, 2018. Each investor contributed $10,000 every year. One investor somehow managed to pick the very best day of each year to invest. The average annual return on that investment would have been 9.16%. The other investor was not so lucky and actually picked the worst day each year. Even with the worst investment timing, the average annual return would have been 6.91%. At the end of 20 years, the cumulative investment of $200,000 had a value of $415,560.
Timing isnt critical to long-term success:
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Should You Buy An All
Posted by Nick Maggiulli
With the year coming to a close and many assets near all-time highs, you might be wondering whether now is a good time to buy. After all, nobody wants to deploy their capital right before a crash and then wait years before seeing a return on their investment. We all want the best price possible, and buying near an all-time high doesnt feel like we are getting the best price.
This intuition is correct. As I have shown previously, there is only a 5% chance that you are going to buy an asset at its best possible price. This means that there is a 95% chance you will buy too high relative to some lower future price. Does this imply that you shouldnt buy near all-time highs? Not at all.
In fact, the data suggests that for many risky assets , all-time highs are a bullish indicator, at least in the near term. Why? Because all-time highs tend to follow other all-time highs. Of course, this process wont last forever, but it can go on longer than you think. This is why there is nothing wrong with striking while the iron is hot and this post is going to demonstrate why.
How To Trade Unitedhealth Stock After Its All
- Dow-30 member UnitedHealth is up around 39% in 2021.
- Q3 metrics released in early November were robust and management raised full-year EPS guidance.
- Long-term investors could consider buying the dips in UNH shares, especially if they decline toward $470.
Investors in the health insurer UnitedHealth Group , a member of the mega-cap, 30-component , are enjoying significant returns in 2021. Year-to-date, UNH stock has returned 38.9%. By comparison, the Dow Jones US Insurance Index is up 24.9%.
On Dec. 16, UNH shares hit a record high, just shy of $497. But since that peak, they’ve eased about 2%, trading around $487. The share price now supports a dividend yield of 1.2%. And the stocks 52-week range has been $320.35 – $496.96, while the market capitalization stands at $458.8 billion.
Management announced robust Q3 metrics on Oct. 14. Revenue was $72.3 billion, compared to $65.1 billion a year ago. The mega-cap healthcare group reports revenue in two main segments:
- UnitedHealthcare, which offers healthcare benefits to employers, individuals as well as Medicare and Medicaid beneficiaries
- Optum, a health information technology and innovation firm that provides a range of services to improve healthcare and insurance services.
Adjusted net earnings per share came in at $4.52. Cash flow from operations was $7.6 billion. UnitedHealth also increased full-year net adjusted earnings to $18.65 to $18.90 per share.
On the results, CEO Andrew Witty said:
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Adding Unh Stock To Portfolios
UnitedHealth bulls with a two- to three-year horizon who are not concerned about short-term volatility could consider buying the stock around these levels for long-term portfolios. The target would be $547.31, the fair value implied by several models.
Alternatively, investors could consider buying an exchange traded fund that has UNH as a holding. Examples would include:
- iShares U.S. Healthcare Providers ETF : This fund is up 22.0% YTD, and UNH stocks weighting is 25.34%
- SPDR Dow Jones Industrial Average ETF Trust : The fund is up 17.1%YTD, and UNH stocks weighting is 9.05%
- Amplify CWP Enhanced Dividend Income ETF : The fund is up 15.4% YTD, and UNH stocks weighting is 6.65%.
Finally, those who are experienced with options strategies and believe there could be further declines in UNH shares, might prefer to do a bear put spread.
Most option strategies are not suitable for most retail investors. Therefore, the following discussion is offered for educational purposes and not as an actual strategy to be followed by the average retail investor.
What To Expect From Unitedhealth Stock
Among 28 analysts polled via Investing.com, UnitedHealth stock has an outperform” rating.
Analysts also have a 12-month median price target of $494.44 on the stock, implying an increase of more than 1.5% from current levels. Put another way, Wall Street believes most of the good news has already been factored into the share price. The 12-month price range currently stands between $360 and $570.
However, according to a number of valuation models, such as those that might consider dividends and P/E or P/S multiples, the average fair value for UNH stock, via InvestingPro, stands at $547.31, implying an upside potential of more than 12%.
Moreover, we can look at the companys financial health determined by ranking more than 100 factors against peers in the information healthcare sector. In terms of growth and profit health, UnitedHealth scores 4 out of 5 . Its overall performance is rated great.
Trailing P/E, P/B and P/S ratios for UNH stock are 29.7x, 6.5x and 1.6x. By comparison, those metrics for peers stand at 8.5x, 1.4x and 0.7x. Put another way, UnitedHealth stock has a frothier valuation level than its peers.
Finally, readers who watch technical charts might be interested to know that several of UNH’s short and intermediate-term indicators are pointing to overbought levels, and suggesting caution.
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Covid Cases Setting New Highs But Restrictions Staying Lighter
Covid cases continue to set new heights in places around the world, but so far governmental responses have been muted. The Center for Disease Control announced that quarantines for COVID could be only 5 days instead of 10 days France enforced public gathering restrictions but kept schools open and Spain has so far only required outdoors mask wearing. While people wait to see how reduced the severity of the omicron variant might be and what the full impact will be on hospitals and lives, governments around the world are exercising caution in taking the sorts of measures seen last year around this time or at the outset of the pandemic.
Whether omicron means the end of the pandemic from a health standpoint or just from a policy standpoint remains to be seen, and fingers are crossed that omicron is indeed mild. So far, the market has taken things in stride with only a couple short-lived sell-offs, and nothing that has restricted Santa’s effect on the markets.
Should I Invest When The Market Is High Dispelling The Buy Low Sell High Myth
Should I invest money in the stock market after all-time highs?
Most investors realize trying to time the market by always buying low and selling high isn’t a realistic endeavor. Yet even with that knowledge, if you have a substantial amount of cash to invest, the thought of investing when the stock market is hovering near all-time highs may give you pause. Similarly, when facing the opportunity to ‘buy the dip’ , few investors have the stomach to do so.
As reasonable as these examples may sound, they both describe aspects of market timing. Despite the recent pullback in the U.S. stock market, the S& P 500 has already set 10 new record highs in 2021 and coming off two very strong years. So what should you do if you have cash to invest and the market is strong?
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Revisit What History Tells About Investing During All
Would you be surprised to know that investing during all-time highs has little correlation with determining what stocks returns will be in the next five years?
Surely, new market highs automatically ensure the markets are ready to tumble, right?
History tells a different story. Since 1926, after hitting new market highs, stocks tend to be higher one year, three years, and five years later.
How Frequent Are Market Corrections Following All
- Looking out just one year from each all-time high in the S& P 500, market corrections greater than 10% have occurred only 6.5% of the time.
- As we extend the time horizon, market corrections become even rarer. In fact, the S& P 500 has never been down by more than 10% at the end of a 10-year period following any of its all-time highs since 1950.
- Long-term investors have the advantage of an extended time horizon. Staying invested can help them stick to their financial plan.
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Whats Next For Blackberry Stock After A 4% Move Last Week
Investors appear to be unconcerned about rising COVID-19 cases. According to data from John Hopkins University, more than 1 million more cases were reported on Monday. One reason the numbers were higher was because of a delay in reporting from some U.S. states. The Omicron variant continues to spread but case dont seem to be as severe as the Delta variant.
In fact, cruise line Carnival was among several travel and leisure stocks climbing in premarket trading. Travel and leisure have been among the hardest companies hit by COVID-19 because it has hit all workers including pilots, flight attendants, baggage handlers and more.
Airline were able to influence a dispute between the United States government and AT& T T and Verizon over the companies 5G plans and how they might affect airline safety. The telecom companies were providing an alternative plan. But after airline unions started speaking up over the safety issues, AT& T and Verizon decided to push their plans back two weeks to reconsider the safety concerns.
After the open, the ISM Manufacturing PMI report will provide investors with a measure of manufacturing strength by analyzing new orders, order backlogs, imports and exports, production, and inventories. The JOLTS Job Openings report will also be released. Both reports carry the potential to move markets, so traders will want to be aware of them.
What About A Lump Sum
You might be on board with long-term thinking when it comes to small, monthly contributions to your retirement plan. But what about a large lump sum of moneyan inheritance, your bonus, or proceeds from selling an asset?
Those one-off situations require careful consideration, but that doesnt mean you should hold off on investing when markets have been rising.
Again, ask yourself the questions above. Next, do an honest assessment of how you would feel and react if the market falls immediately after you invest all of your money . With that information, make a strategy.
You dont have to invest everything all at oncebut its dangerous to try to time the market. Instead, make a plan and stick to it. Yes, thats boring, and thats how its supposed to be.
Lets assume you have a lump sum of cash and:
One solution is to set up a systematic investment schedule to invest that money over several months. You could even invest over a few years, depending on how much it is and how worried you are. Another option is to invest half now and the rest over time. Just remember that theres a tradeoff to every decision you make.
If you move quickly and invest the money immediately or over just a few months:
If you move slowly and invest small amounts each month, taking a year or more to get fully invested:
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