It’s pointless to look at Tesla’s P/E, when they’ve only just become profitable a few quarters ago and their earnings are set to increase significantly in the coming quarters. You want to arrive at a valuation, predict future earnings, apply a time discount to the cashflows, the DCF model will tell you the fair value. Comparing current price (forward looking) with past earnings makes little sense for growing companies.
Either you believe you’re dumber than the market, which makes you a passive indexer, or you actually think you’re smarter, which means you should be picking stocks. Statements like this imply the latter. Sure, in retrospect the last few months haven’t been the best, with companies which benefited from covid lockdowns, like netflix or zoom, gaining too much in price. But these things are only obvious in hindsight.
Not only the financial analysis is worrying, but anyone can rent a Hyundai Ioniq 5, an electric VW or Volvo and wonder how on earth Tesla’s hype can still work on retail investors.
Long story short: When Twitter and Reddit drive market valuations to this extent, it might be a good idea to have at least some tilt towards profitable companies. Otherwise, just like the for dotcom bubble, I’m afraid that 10 years won’t be enough to heal from the return to reason.
In my opinion, the rule for investing in dividend stock is no different as for other stocks. If your investment horizon is under 10 years, I wouldn’t recommend it for the bulk of your assets. If you end up having to sell your stock at a bad price, the loss may nullify the dividend income.
Of course, if you would not necessarily HAVE TO sell your stocks after 8 years, that’s another story. In that case the current market could be a discount.
It’s important to be realistic though. Currently there is currently a high risk of western companies losing certain growth markets and possibly not getting back into them for a long time. The growth needed to recover from the resulting price corrections will have to come from elsewhere. That is why I would look at 10 years+ as a realistic investment horizon for stocks at this point.
Congratulations Tobias on your terrific achievement in building up your asset base to such a degree at 35. This is a fantastic achievement that you can be very proud of. Well done!
You are also willing to learn and grow your investing skill by soliciting feedback. That is also admirable.
I suggest that you take some time exploring the Motley Fool website. It is more geared for US investors but the principles you will find there apply universally. (Plus companies listed on US exchanges are still your best source of long term wealth IMO.)
You might like their Rule Your Retirement portfolio recommendations as it suggests various mutual funds and ETFs, including ones with international exposure. You get a one month free trial and then it costs $99 a year, less if you subscribe for two years. Their Stock Advisor service is also helpful.
Depending on your risk tolerance you might decide to keep 60 or 80% of your portfolio in equities (either invested directly in stocks or in ETFs or funds that are) and the rest in cash or bonds.
As you are still young, I would encourage you to invest in stocks. Long term the stock market has always gone up and the benefits of long term compounding are truly life changing and miraculous. It is good to learn about how to harness this dynamic to your benefit as soon as possible.
The Motley Fool with teach you how to do this: at least 25 stocks that you are willing to hold for at least 5 years.
As you gain in experience you my decide to treat certain stable stocks as cash equivalents with upside potential and allocate a small percentage of your portfolio to high growth stocks with great potential but also more volatility. Even owning one of these stocks has the potential to wipe out all your losses from other investments and still garner life changing returns.(Think FANG stocks.)
I am fortunate in having started my investment journey at about the same time as you but with far less that $1 million to invest and was able to retire at 50 with more than I could ever have imagined thanks to stocks and compounding.
I wish you the same good fortune and commend you on what you have achieved so far.
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