Long Term Stock Market Strategy Part 1

Dive into Part 1 of Severin’s Long-Term Stock Market Strategy, where he reviews the fundamental differences between stocks and ETFs, as well as the key distinctions between investing and trading. Coach Severin demystifies ETFs in this lesson, offering various examples, including annualized returns.

TIMESTAMPS

00:01 – INTRO

00:47 – UTILITY

Part 1: Covering the basics of the long-term stock market strategy.

Difference between stocks and ETFs.

Disparities between investing and trading.

Examining various ETFs examples and their annualized returns.

Investing: refers to the process of buying assets with the expectation of generating a return of profit over time.

Individual stocks

- Owning a share of a single company

- Return depends on the performance of the underlying company.
 

Vs.
 

Exchange Traded Funds (ETFs)

- Diversified portfolio of securities, typically stocks and bonds, all bundled in one fund.

- Gain exposure to a diversified portfolio of assets.

Accumulating ETF: reinvests dividends back into the fund, which can lead to compound growth and is the preferred method.

Distributing ETF: pays out dividends and can provide a regular income stream.

The primary goal of an investment is to increase wealth, preserve purchasing power and achieve specific financial goals over the long term.

As traders, we are in an advantageous position when considering long-term investments due to our inherent focus on tracking and analyzing market trends.

1. Continuous market awareness: capitalize on our in-depth understanding of market dynamics.
2. Efficient time utilization: maximize the utility of our time by capitalizing on both short term and long-term opportunities.
3. Leverage expertise: utilize trading concepts to make high-probability investment decisions. 
4. Long-term wealth accumulation: Trading returns can be reinvested leading to compound growth.
5. Passive income: incorporating dividend-paying assets into a portfolio for a regular income stream.

06:42 – IMPLEMENTATION

🔎 06:42 The differences between trading and investing.

Trading: short-term focus with an aim to profit from near-term price fluctuations.

Investing: long-term focus with an aim of overall growth and success of an investment over time. 

Trading: profits from price movements, capturing short-term trends.

Investing: provides ownership and growth and allows one to participate in a company’s growth.

Trading: focused on managing risk in the short-term.
 

Investing: higher tolerance for market fluctuations and volatility.

Trading: relies on technical analysis, examining historical price action and volume.
 

Investing: relies on fundamental analysis, assessing a company’s financial health, competitive position, etc.

Trading: requires frequent transactions, capturing short-term volatility.
 

Investing: buy & hold strategy with the intention of holding for an extended period.

🔎 10:05 The largest individual ETFs and their annualized returns.

🔎 11:45 Example: SPDR S&P 500 ETF Trust 

MSCI World Index: captures large and mid-cap representation across 23 developed countries. It comprises approximately 1,500 stocks and therefore represents a diversified portfolio of sectors.

🔎 12:55 Example: MSCI World Index Sector Weights 

🔎 14:32 Example: MSCI World Index (USD)

Advantages of ETFs:

1. Diversification of your portfolio. You own a stake in a fund that may hold hundreds of individual stocks.
2. There are a variety of ETFs. You can invest in ETFs including only bonds, a mix of stocks and bonds, or one for a particular industry.
3. The diversification of ETFs can hedge risk. If one or two securities in the ETF go down in value, you have the remaining securities in the ETF to help cushion any losses.
4. Low transaction costs. There is only one transaction fee to get access to an entire collection of assets at once.

17:06 – TIPS & TRICKS

★ Use a separate broker for long-term investments.  

★ Keep a long-term perspective. Focus on the future. 

★ Don’t chase a hot investment tip. Do your own due diligence.

★ Niche, low-volume ETFs can have a wide spread (higher cost).

18:04 – FINAL THOUGHTS