Tag Archives: stock market

Avoiding The Hot Performance Chase

When it comes to investing your money in the stock market, Matson Money and co-advisers who follow the Matson philosophy consistently advise investors to stay diversified and focus on the long-term because what could be ‘hot’ today may be, as the rock group Foreigner might say, “cold as ice” tomorrow. Given the hype around the S&P’s recent record-breaking performance, it’s important not to chase after hot performing picks for that limited time rush. It should be noted that not all investment strategies are the same, but Mark Matson can share his opinion on what to look out for from his recent appearance on After The Bell airing on Fox Business.

Trying to predict the future on short-term picks is always a losing game.  Sometimes, investors can be emotionally driven to make certain changes to their portfolios because the outlook on the market can bring feelings of prosperity and what former Federal Reserve Chairman Alan Greenspan called “irrational exuberance” with respect to the future value of  equities. However, letting emotions play a factor in managing your portfolio  can be detrimental. Strategic portfolio management requires  looking at the bigger picture.

It can be a great thing that the S&P and Dow are at all-time highs, but investors should still seek out microcap stocks and international stocks to diversify and rebalance portfolios. This means buy when the market  is down and ignore  emotions and instincts because they can cloud your judgment. Matson’s tip:  Only buy the stocks that are down; ignore  the ones that are up.

And, speaking of long-term picks, Matson is surprised that some investors during the past year appear to have forgotten the fundamentals of investing: owning equities long-term, diversifying and then rebalancing your portfolio. Equities should generally be held for 20 to 30 years.  Gambling,  forecasting or attempting to predict  short-term performance can seriously erode the value of your portfolio.. Matson also suggests investing in  small companies because they  have the potential to offer about 3 to 4 percent more  return compared to growth stocks. Not all stock market strategies may work and it should be noted that this is not a guarantee of positive gains.

Staying Sensible During Market Records

diceIt’s almost like a fact of life; the market will go up and go down, break records and hit all-time highs or lows. In short, the stock market can fluctuate as we have always seen and once it breaks records, people can swing either way about it. Whether they are positive or negative, one could think that becoming active on the market is a good course of action. On the other hand, another might feel as though they missed the mark and they can’t get in on the offers for the time being.

One thing is certain, no matter what the market is doing, investors should stay sensible. If the market is breaking records, it’s nothing new, it has happened before so new highs should not merit excitement or worry. Take it from Zack Shepard, the vice president of Matson Money, over the long-term the market generally rends to rise, so new highs may not be worth the hype. No one can predict what the market will do. Just because something may be trending now, tomorrow it could be down in the dumps. Financial coaches need to rein in their investors and discuss how market records can change in an instant.

If you are going to jump in and buy, hold on to it or just stay in it. Take for instance data published by the Center for Research and Security Pricing (CRSP) with respect to the CRSP 1-10, a stock market index representing the entire market cap of the New York Stock Exchange and other exchange equivalents.  According to the historical data for the CRSP 1-10 index, the average 5-year annualized return after a new high since 1926 is 9.02%! Of course, past performance is no guarantee of future success. This index return information does not reflect actual investor results and no representation is made that your portfolio would experience similar results.

Indices are unmanaged, cannot be invested in directly and their returns do not represent the performance of any actual fund or transactions and do not include management fees, transaction costs or expenses. Just looking at the CRSP historical data, holding out could be beneficial, but that’s the beauty of the market.  It can be a hard game to play, but if you look at your long-term portfolio and manage it well with diversified stocks, you could be on the way to more stable financial footing.

Why Mark Matson Says Video Streaming Company’s Bull Stock Isn’t Really Good for Investors

To a lot of traders out there, the climb back to the top by the popular video streaming company (the one with the white letters and red background) seems too good to be true. But investor and advisor Mark Matson recently appeared on Fox News and said that it’s a bad bet—even as it reaches new highs every day.

To understand the company’s success, it’s important to understand its failures as well. The company has been playing the long game for a while, and after building a giant customer base in the late 2000’s it suddenly altered its prices and membership model in 2011. To many off its customers the change was sudden, unexpected, and worst of all seemed greedy—to many members it amounted to a 50% price hike. The company lost customers, was badmouthed across the internet, and, of course, suffered a blow to its stock.

But the company didn’t flinch. It was counting on the excellence of its product—the same excellence that had made it so popular in the first place—to help it weather the storm. And that’s exactly what happened. The company figured out the magic formula for watch-on-demand, seeing that viewers wanted unrestricted online access to lots of content and they wanted to be able to binge watch entire seasons of a favorite show in a single night. This is such an attractive proposition that the company knew it was undercharging and that ultimately it could get away with the price hike. And that’s exactly what happened.

Three years later, the company has surpassed all of its competitors and remains the number one service in its niche. It’s also had a steady climb in stock price, reaching 389—14% above its 300 peak before the price change.

That’s a great pick, right?

Mark Matson doesn’t think so.

He doesn’t deny that 14% is a nice return, and he doesn’t forecast any impending doom for the company. In fact, he expects it to keep rising. The reason he wouldn’t bet on the company is totally different: it’s that Mark Matson doesn’t bet.

Not on individual companies, at least.

Matson’s point on Fox news is that, over the same period since the company started its recovery, if an investor had invested widely across the S&P instead of “picking” the bullish company, they would have made a 60% return instead of just 14%.

To Mark Matson, long-term strategy is always the best strategy. The market overall is less volatile than an individual stock, it generally recovers from slumps, and often the returns are as good or better than picking a winning company.

In other words, Mark Matson has the same strategy as the company: play the long game.

Why Mark Matson Provides Investors with the Opportunity to Make More Money

Most of the time when people talk about stocks, they’re looking for “picks”—companies that are about to explode and see a sudden uptick in stock price, bringing an immediate windfall to investors.

Mark Matson and his team at Mark Matson Money do not play the picking game.

Recently invited to discuss the rising stock prices of three major pizza companies, Mark Matson’s Director of Marketing, Zack Shepard, refused to give in to the hype and excitement that other stock “gurus” feel about these companies. Pizza chains are making big money right now as they make it easier to order online. They’ve made an irresistible product and they’re riding the profits upward to higher and higher stock prices.

But Zack’s comment on this trend clove to standard Mark Matson philosophy: the only reason he likes these companies is because they’re part of a market that gains 3% a year.

In other words, it doesn’t matter to Zack—or Mark Matson—if these companies are seeing 10%, 20% or even 30% gains right now. Those short term gains are volatile and hard to predict. Even if you successfully predicted the upswing in the pizza chain niche before it happened, it could run out or reverse itself at any time for any number of reasons. Picking a winning stock is difficult, and staying with it is like trying to stay on a bull at a rodeo. You will eventually fall off.

But the market as a whole is less volatile and generally grows both more reliably and more smoothly. Instead of potentially getting a 10% return followed by an 8% loss, you have the potential to achieve 3% a year with relatively little variation by simply choosing small capital as a whole. A similar steady growth can be found with a diversified approach to almost any market.

To Mark Matson and his staff, equities are not only the most reliable and least risky approach to making money on the stock market, long term they have the potential to be the most profitable. If an investor really feels the itch to play a few promising picks, it should be with a tiny fraction of his overall investment, putting the majority into a diversified portfolio that provides the opportunity to make him money even when his favorite company blunders.