The stock market has experienced some volatility of late. This has many investors on edge. I’m staying calm and buying the dip however.
As an experienced investor, I’ve seen this kind of market activity many times, and it always creates opportunities.
Why are shares falling?
Whenever markets are wobbly, the first thing I do is try to understand why. In this case, there are several factors causing the volatility.
First, there’s a huge unwinding of the ‘borrow Japanese yen, buy US tech stocks’ trade that hedge funds and institutional investors have been making recently. This unwinding seems to be the result of a surprise move by the Bank of Japan to hike interest rates to 0.25%.
Second, economic growth is slowing in the US. Recently, there has been some talk of a recession and some investors are concerned that the Federal Reserve hasn’t yet reduced interest rates.
Third, there’s some profit taking in the tech space. Recent Big Tech earnings weren’t amazing and investors are realising that some of these companies are going to have to spend a lot of money on artificial intelligence (AI) in the near term.
Fourth, Warren Buffett sold half his Apple shares. This has probably spooked a few investors given his reputation.
So overall, there’s a lot to digest.
Long-term mindset
I’m a long-term investor who is investing for retirement however (15-20 years away). And there’s nothing there that’s scary enough to change my strategy.
Over the next 15-20 years, we’re still likely to see huge growth in industries such as AI, cloud computing, semiconductors, travel, and healthcare.
So I’m taking advantage of the share price weakness and buying stocks and funds for my ISA and SIPP.
What I’m buying
Now, The Motley Fool rules prohibit me from mentioning the investments I’ve bought or sold in the last few days. So I can’t reveal the specific names of the stocks and funds I’ve been buying.
In recent days however, I’ve invested in:
- A Big Tech company that’s forecast to generate huge earnings growth this year
- A chip manufacturing equipment company that’s likely to play a major role in the AI boom
- An investment trust with a big positions in Nvidia and Amazon
- A global equity fund that’s returned about 15% a year since its launch
More buys to come
And I’m just getting started. Over the next few weeks, I plan to continue deploying capital into the market.
One well-known stock I’m considering buying more of is Alphabet (NASDAQ: GOOG), the owner of Google and YouTube.
This stock’s experienced quite a sharp sell-off. A month ago, it was trading near $190. Today, it can be snapped up for around $160 – roughly 15% lower.
At current levels, I see value on offer. At present, the company’s P/E ratio is just 21, falling to 18.5 using next year’s earnings forecast. For a company of Alphabet’s ilk they’re attractive multiples, in my view.
Of course, this stock has its risks. As a provider of digital advertising services, Alphabet’s vulnerable to a slowdown in the global economy. It’s also vulnerable to new technologies such as ChatGPT.
At the current price however, I like the long-term risk/reward proposition.
