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Hello, and welcome to a new season of Trade Off, The Globe and Mail’s stock-picking contest! |
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If you played last season, you know the drill. If you’re a first-timer, welcome aboard. Either way, this newsletter, Trade Secrets, is your weekly guide to the action, and now is a good time to start thinking about the portfolio you want to build. |
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If you’re new, here’s the short version. You’ll get $100,000 in virtual cash to build a portfolio of five to 20 stocks listed on the Toronto Stock Exchange, the NYSE and the Nasdaq. You can put as little as 5 per cent or as much as 25 per cent into any one name, and hold up to a quarter of your money in cash. It’s a no-risk simulation, but the prizes are real: $5,000 for first place, $3,000 for second and $2,000 for third, plus weekly Globe subscriptions and a few random draws along the way. Choose your picks carefully. But if trends are not your friend, don’t fret. You can trade in and out of names all season long. |
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| A bumpier market, and a reason for optimism |
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A quick lay of the land as you set up. After a big run for technology stocks, the market has turned choppier, with wider daily swings than we saw earlier in the spring. That may be worth getting used to if you’re building a portfolio for the next 12 weeks. |
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The brighter side is that the S&P 500 just posted its best quarter since 2020, and history tends to be kind to years that start like this one. Investment firm Carson Group looked at market data going back to 1950 and found that when stocks rise 10 per cent or more in the second quarter, the third quarter has only been negative once, while the fourth quarter has never been negative. Additionally, the average gain over the back half of those years was 11.7 per cent, more than double the usual 4.9 per cent. |
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The bigger question for players is whether the AI winners keep winning or the money keeps rotating. Some big investors have already started trimming the crowded technology trade and moving into quieter corners, from health care to consumer staples. |
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| How not to blow it: The mistakes even pros make |
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If you want one piece of homework before you pick a single stock, consider a lesson from Barry Ritholtz, author of How Not To Invest, who recently appeared in the latest episode of Ticker Take. And as a long-time investor, he’s found that the difference between good and bad investing is mostly about avoiding unforced errors. You shouldn’t feel bad about making mistakes, since he says the pros fall into the same traps. But the key is learning from those setbacks. |
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Mr. Ritholtz walked us through nine common mistakes, but there are a few that matter most in a game like this. For example, he says don’t try to time the market because nobody can. He also highlights that FOMO – chasing a stock to follow the crowd – is just greed wearing a different name. At the same time, panic selling is generally a losing battle. And anchoring your mindset to the price you paid for a stock is equally misguided since stocks don’t care what you ponied up in the first place. I know in a stock competition there can be a desire to jump around, but Mr. Ritholtz has found that sitting tight often works best. |
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You can watch the full conversation, and all nine mistakes, here. |
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A few Globe reads to get ready for the Trade Off competition. |
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If Mr. Ritholtz has you feeling like the deck is stacked toward the pros, this one is a good counter. It makes the case that individual investors hold some real advantages over Wall Street, from patience to flexibility, if they know how to use them. |
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Canadian bank stocks have been on a run lately. In fact, it’s the single sector driving the S&P/TSX composite index to beat the S&P 500 for a second consecutive year. So is it time to take some profits? In this column, David Rosenberg, founder and president of Rosenberg Research, makes his case. |
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A lot of us are saving with retirement in mind, so here’s a good one on a deceptively simple question: What is the retirement age in Canada, really? It looks at the gap between the age the system sets and the age Canadians actually have in mind. |
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That’s it for now. Take some time selecting your picks, and we’ll be back next week with more. |
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Jon Erlichman is the founder of Ticker Take on YouTube and a contributor to BNN Bloomberg. |
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