What if we made a big investment mistake?

One of the most common investment mistakes is lack of diversification. Invest too much money in one sector or worse one company.  

Recently, there were the cannabis bubble and the crypto crash. Some people invested most or even almost all their portfolio in one of these sectors and suffered a big loss unfortunately.

There is another one – the tech sector. Nasdaq index lost more than 30% from all time high stock price in December 2021 thanks to central banks’ interest rate hikes to fight inflation. There was too much easy money chasing the tech stocks right after the short recovery from the pandemic market crash in Spring 2020. The hiring was frenzy back then. Now, the firing of tech sector is as fiery too.

The good news is that we can learn our lesson and hopefully have time to recover.  Hope we don’t need this money for a long while.

The other piece of good news is that it is a sector rather than one company. If it is an index ETF of a sector such as Nasdaq 100, it could recover when the inflation is down to normal range and central bankers is more dovish about interest rate. More investment will be available for the tech sector. Then, the stock price of tech companies can rise again. Perhaps, then we can sell the tech stocks and switch to other sectors. It will take time. Let’s be patient if we can afford to wait and do not need the money now. Now, the tech stocks price is more than 30% off from all time high in December 2021. That’s a deep discount. 

The key question is when interest rates will be lowered. Some professionals said if there is no recession and the economy is humming along just fine, the central bankers do not need to reduce interest rates. The mortgage rate of 5-year fixed in Canada is between 4.5% to 5%. Many haven’t seen that for a long time which is more than double what we had before the recent inflation. It is very challenging for many with a variable rate mortgage. Therefore, a recession might be a good bad news for homeowner with a mortgage if they don’t lose their jobs. That is just so hard. Further more,  the interest rate might not get back to what it was before the inflation per CNBC.