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10 Sep 2020

Market Metrics: Nasdaq Index

Sector investing can be sexy and even euphoric right up until that sector blows up and wipes out your investment capital.

What’s not to love about the FAANGM (Facebook, Apple, Amazon, Netflix, Google and Microsoft) which have increased over 500% during the past 7 years but the price you are paying today to buy these listed companies is extremely high relative to earnings.

This level of crazy in the tech sector has happened before.

Just turn your mind back to the run up to the 2000 Tech Wreck (Dot-com bubble) which was then followed by the 2001 September 11 terrorism attach and the second Iraq Gulf War in 2003.

The result for the tech sector.

The Nasdaq Index fell by 75% and investors had to wait 15 years for prices to return back to the 2000 price level.

Click for chart.

The price you pay is what matters when investing.

Overpay, even for a quality asset and it could be decades before you make a profit.

As Benjamin Graham taught, don’t speculate. Instead remain invested according to your appetite for volatility and when fear and panic take hold, react by buying more quality assets at discounted prices.


At Newealth we are always looking to support and promote our clients wherever possible and if you have any ideas or comments, please feel free to email me or to call me on +61 2 9267 2322.

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