Technology Stocks Are Crashing — What Now
Things could get really volatile soon and I want you to be prepared. Here’s my game plan to weather the storm and how to build enough cash reserves to buy at lows.
- Matt Hagemann
A friend messaged me yesterday saying that his portfolio lost 10% of its value recently and that this was complete doomsday. Judging by the futures, the NQ was down 6.8% from its highs (a 1.8% gap down that morning alone). They are down again today. It’s frustrating, I get that.
It is also noteworthy that the sell-off hurts technology stocks in particular. But mind that they were also the largest beneficiary in recent months:
- Nasdaq 100 is 53% above its weekly 200 EMA.
- S&P 500 is 31% above its weekly 200 EMA.
- DJIA is 19% above its weekly 200 EMA.
Which one is going to be hurt first and foremost once a correction is underway? Of course it’s going to be the most stretched industry sector.
Information technology is 28% of the S&P 500, and 20% of the DJIA.
You’ve got to know what you are buying. You need to have conviction in the companies you’re investing in. Am I going to dump all my holdings just because they seem to be ‘overvalued’? Of course not. I’m going to hang in there with stocks going down 30% and then come back up 80%. Even if that takes another 3 years.
It’s the nature of the market and it does an excellent job at weeding out the less convinced.
Volatility Is the Price You Pay for Your Returns
If you held Apple all these years, you are sitting on a fortune now. Same goes for Amazon and many other megabrands of today. Amazon went top to bottom 60% several times in its history. You’ve got to have conviction in what you’re buying to hold onto such kind of volatility. I also go to the grocery store to pick my favorite marmalade brand. If I see a 30% discount I’ll pile up. But you cannot ever pile up if you don’t have conviction in your holdings in the first place.
So here’s what I would do. Go through your portfolio name by name. Ask yourself why it’s there in the first place. Start with ”I own XYZ because...”.
Warren Buffett had also advised it in one of his interviews. If you can’t tell that story, sell it off. It doesn’t belong in your portfolio. Free up that cash so you can pile in when spectacular opportunities arise in future.
I had shared the same message yesterday on reddit and the post went viral instantly. It has close to 4,000 upvotes and 1,600 comments now, a sign that it resonated strongly with a lot of investors.
“Honestly during these VERY red days and weeks, this post was exactly what I needed.”
Comment by u/diamondtoes_69
“This is great advice I needed to hear. I didn’t sell any of mine. Abs I agree that one should have an attachment and a belief in what they buy. They should know that business like it is their own. That’s why I didn’t get shook. But to hear that this is going to happen many more times is good for me”
Comment by u/EasyBeeTrader
Things could get really volatile soon and I want you to be prepared. I can guide you through it live so you won’t be at the mercy of the market.
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About Matt Hagemann
15+ years trend following experience. I help futures traders make consistent profits without stress and without day-trading.