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GameStop axes its short-lived NFT marketplace as it retreats from crypto
(www.engadget.com)
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this post was submitted on 14 Jan 2024
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Yeah, I wouldn't touch Tesla with a 10-metre pole. That's a prime hype stock that IMO is massively overvalued. But, even if I'm convinced it's overvalued I wouldn't short it because the market can stay irrational much longer than I can stay solvent.
The problem with that is that they're so big that the upside is not great. But, the downsides are murky. What if Biden is re-elected and the justice department, FTC, etc. get serious about breaking them up? Besides, in the medium term a lot of their share price is based on hype, FOMO, etc.
With index funds, you get a good hedge against any one company's swings. And, if Alphabet is hurt probably Meta will benefit so you in the end you're just tracking tech stocks in general.
The upside should mirror the market because the top 10 companies in the S&P make up ~30% of the index. So if Apple, Amazon, etc make big moves, the market will likely make similar moves.
So buying a handful of massive companies is just an inefficient way to buy the S&P, which is just an inefficient way of buying the whole market.
It's not the worst idea, I just don't see much of a point. I don't know why I should expect Apple to outpace the market.
But yeah, I totally agree with you, buying funds makes a lot more sense. I do pretty much zero work and get most of the benefits for a fraction of the risk.
Mostly, sure. But, the difference is that the index contains some of the smaller companies too. If there's something that hits all the big companies at the same time (like robust anti-trust enforcement actions), the mid-sized companies are the ones who are most likely to benefit because they can take advantage of the pressure on the big companies.
If you just invested in the big companies you could be hurt, but theoretically if you invest in the whole market (or an index representing it) you could have the losses in the big tech stocks offset by growth in the mid-sized ones.
Anyhow, I think we mostly agree. The market is manipulated, many traders, even pros, are irrational. So, even if you know what you're doing, it's smart to hedge and spread your risk around.