- Buying AIM stocks.
- Buying mining stocks.
- Buying IPOs
- Buying drug company stocks on news of successful drug trials.
- Buying stocks because they were tipped (in email newsletters or YouTube, etc.).
- Buying stocks because they were ranked highly by a stock research site that I had a paid subscription with.
- Selling in panic only to see the shares recover the next month
I came across this video today, and I would urge any investor (especially any non-US investor) to watch it.
One great tip is at this point in the video - don't just buy USA stocks/ETFs - these days it may not be the best choice.
So what should we do?
Well, we all want to try to beat the market and make great profits, but we have to admit to ourselves that even professional traders rarely beat the market. Let's face it, these days we are competing against 'bots' that can complete trades in milliseconds and watch the whole market 500 times a second, every second of every day.
We should put 90% of our spare cash into nice global/large index ETFs and the other 10% we can 'play' with. So we can have two 'accounts', WORK and PLAY.
My WORK cash goes into ETFs (and an active fund). My WORK account cash is spread across ISAs, GIAs and a SIPP.
Because any gains made in a GIA are subject to Capital Gains Tax (CGT), I try to minimise any selling inside my GIA accounts. This means that I have large 'keep forever' holdings in my GIA accounts (such as Global MSCI ETFs like SWDA, Artemis Global Income Select (acc) active fund, EQGB, IITU and IUCM, etc.) and the other ETFs are held inside ISAs and SIPPs to avoid CGT if and when I sell them.
On the other hand, my 10% PLAY cash is inside a £20K Trading 212 ISA account. Some of this cash is used to trade in individual company stocks. This is money that I have told myself that I can afford to lose 50% on - you should ask yourself the same question. If you can't afford to lose 50% then large index tracker ETFs such as MSCI, FTSE, S&P 500, NASDAQ 100, etc. will always go up and will beat any savings account (over the long term 10+ years), so the sensible (but boring) choice is to simply invest in these 100%.
Other types of ETFs
We have all type of ETFs to choose from (country, sector, factor, commodity, etc.) besides the benchmark global ETFs such as SWDA (or HMSW), ACWI or VWRP.
I can use Trading 212's search page to look for trending ETFs or the iShares Funds Finder page and look at the 6 month cumulative performance column.
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This year, gold, platinum, silver, euro banks, defense, copper miners, economic and monetary union mid caps (EMUM) seem to be top of the ETF list.
However, these ETFs will probably be at all time highs just now, so it is a good time to buy them?
Tom's video above goes on to say that we should DCA into the market and his second video is also excellent...
This video shows how to search for long term ETFs to invest into using JustETF.com.
Follow the Money!
What I do is 'follow the money'.
- Who has all our money? - Answer: the banks.
- Where does money come from and who has a magic money machine? Answer: governments and the banks.
Let us look at the arrival of Covid in 2020.
Through the end of April 2020, investment-grade corporate bonds gained 1.4% versus Treasury bonds' 8.9%, indicating potential investor wariness about the risk of corporate bonds. Morgan Stanley estimated 2020 U.S. investment-grade bond issuance at $1.4 trillion, around 2017's record, while Barclays estimated the non-financial corporations will need to borrow $125–175 billion in additional debt to cover the drop in earnings from the pandemic recession
European and USA bank share prices fell 40-50% within a week and took a year to recover:
Governments prevented the collapse of the economy by raising money via bonds (debt) and corporations needed to borrow money, so any BRAVE private retail investor who had spare cash in March 2020 could have invested in the financial sector for a 30%-50% avg. annual gain over the next 6 years.
Banks these days are not allowed to fail!
Any investor that sold after the crash would have done much better if they had not sold but just waited it out. If you have a tax-free account wrapper like an ISA and the shit hits the fan one day (e.g. Putin attacks NATO or China attacks Taiwan) - why not sell a good portion of your investments immediately but then buy them back as soon as the government and banks start talking about stepping in with bonds and turning on the money machine? If the government and banks are lending/printing money, we all know who is going to profit from it! You may buy it back while the stock is still falling - but so what? You will have lost less in the long run as you bought it at a cheaper price than you sold it for. Of course this is really only suitable within a tax-free account or else you may incur taxes.
In some cases however, it might be advantageous to make a loss if you have already made substantial taxable gains on previous sales - for instance you might sell EQGB after it falls and so make a loss, but then buy EQQQ (buy a slightly different stock because of the UK 30-day rule). Any loss you made on the sale of EQGB can be offset against your gains for that year and you still have EQQQ for little extra cost.
Money always flows through the banks - governments like to borrow money and spend our money so the lender (financial institutions - mostly banks) will always ends up much better off in the end.
The Trump effect can be seen in early 2025, USA banks dipped and are slow to recover, whereas Euro banks have risen twice as much in the last 6 months as money/investment is going into more stable countries. The dollar rate has also suffered by approx. 9% during that time for non-US investors.
Compare the ETFs IUFS with BNKE in the above chart.
USA gov. spending can be checked on this website.
A large amount seems to go on Medicare/Health and National Defence, so these two sectors should do well with the tax payers money and it may explain why some members of Congress have bought United Health shares recently.
I like to concentrate on ETFs in the Finance sector, Tech sector, Coms Sector, Health sector, Defense sector (not so much recently) and Semi-conductor and robotics sectors.
You can check out the ETF World sector performance on JustETF.com here.
There is not a lot to choose between the Global market sectors at the moment though Emerging Markets seem to be marginally better - e.g. XMMS gained 10% in 6 months and World Financials XWFS just 6% in 6 months (vs. BNKE 28% in 6 months!).
So I look for the sector that is performing well, then look for any country bias - e.g. USA/EU/UK/Japan/Canada/Australia to see where the money is going. In the case of financial ETFs it seems to be banks rather than the whole financial sector, so I have a look to see if any one country is performing better in that area than an All World ETF or a S&P 500 ETF.
My favourite top sector ETFs are IT (IITU), telecoms/coms (IUCM), finance (XWFS, BNKS, IUFS, BNKE) with a large portion in Global MSCI SWDA and NASDAQ EQGB.
It is very difficult to decide at the moment where to invest, if you are the cautious ETF investor then buy a world sector ETF each month, otherwise choose a low priced ETF in your favourite sector each month.
Once you have decided on the sector/type, look for the best country as well as the World version, and whether to buy a hedged version or not. Only then, should you look at the TER charges to pick your preferred ETF.
Outlook
The next quarters Q3/Q4 are usually a bullish on the global stock market. If the USA Fed do cut interest rates as expected it should give a small boost to US markets (but most will already be priced in). Most of Trump's tariffs may be declared illegal but inflation and employments figures will probably get worse.
USA Bank ETFs have started to beat World and EU Bank ETFs in the last 3 months however, so BNKS looks like a good investment for my DCA cash this month though I still like IITU and IUCM as well as BNKE - but I will have to cast my chicken bones and then check my crystal ball!
This is not investment advice - please do your own research.
P.S. If you followed my Broadcom AVGO tip yesterday, I hope you sold at the top like I did, just before it dipped back again :-(
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