The Downside of High-Reward, High-Risk Investing

Over the past number of years, the best investments nearly all came out of the technology sector. We had terms like the FANNG stocks coined, we were told value-investing was dead, and year after year, the stable dividend-paying stocks just slowly trailed behind high-flying technology companies.

But, towards the end of November 2021, things began to change.

In November of 2021, the Nasdaq was up 130% on a five-year chart but is now up just 61%. The same chart shows the Dow was up 55% when the NASDAQ hit its peak but is now up just 37% over the last five years. On a year-to-date chart, the NASDAQ is down 31%, while the Dow is off just 11%.

If you look at individual technology stocks, it can get even worse. For example, Tesla is down 44% year-to-date, while Meta is off more than 70% since the start of the year.

But, something like boring old Coke-Cola, is flat on the year. And I should mention Coke is yielding a 2.96% dividend, which, if calculated into the year-to-date return, would put your investment ahead for 2022. Not very many big-name NASDAQ technology stocks can say that.

Every investor wants a big return. Seeing a stock climb 10, 20, 30 percent, or more in a single year. And it certainly beats seeing a stock climb a measly 4 to 6 percent.

However, the more important thing investors need to remember is that when stocks rise by double digits or more, they probably carry a lot more risk than a stock that hardly looks alive.

The Dow Jones Industrial average is full of stocks that creep along. They don't seem like suitable investments if you look at them on one-year charts. But, over decades, these stocks have been outstanding performers, especially if you add dividends, when considering their total returns.

Furthermore, the slow growth comes with low, or at the very least, much lower risk than the higher return stocks. That low risk could be what keeps you from making a rash decision with your portfolio.

When a holding in your account is down 40 or 50 percent in a year, it is easy to simply say you are cutting your losses and selling the stock.

However, history has proven the best method of investing is a long-term buy and hold. And that means holding stocks when they are down or lost massive amounts of value. Continue reading "The Downside of High-Reward, High-Risk Investing"

Goldman Sachs - A Compelling Long-Term Buy

Noah Kiedrowski - Contributor - Biotech - Goldman Sachs

Favorable Backdrop and Financials

The latest Federal Reserve meeting indicated that interest rate increases might need to be accelerated while boosting its domestic GDP estimates for 2018 and 2019 alluding to a domestic and global economic expansion. Augmenting this economic backdrop is a record number of IPOs, a record number of global merger and acquisitions, rising interest rates, market volatility, deregulation and tax reform. All of these elements provide an ideal confluence that bodes well for the financial sector. The Goldman Sachs Group Inc. (GS) in particular looks to benefit in unique ways due to the consulting fees regarding mergers and acquisitions, trading around market volatility, launching of its cryptocurrency futures contracts as well as rising interest rates as Goldman Sachs has entered into the commercial banking segment when the bank acquired GE Capital’s savings business in 2016 assuming approximately $16 billion of deposits at the time. JP Morgan (JPM), Citi (C) and Bank of America (BAC) are all poised to benefit from the favorable economic backdrop as well however I feel Goldman is in a unique position to benefit across the board in all business segments. Goldman Sachs is relatively inexpensive based on historical standards after a string of quarterly results that have beat Wall Street’s estimates. Goldman Sachs offers a 1.3% dividend yield that was recently increased and a share buyback program to augment the overall favorable backdrop providing a compelling long-term buy. Continue reading "Goldman Sachs - A Compelling Long-Term Buy"