The market continues to punish the high multiple and money losing stocks.
Nearly every high-flyer in the market rally of 2020 has witnessed declines of 70-90% from their highs. This week also saw some significant stress in the cryptocurrency markets.
Some unprecedented things are happening to cause significant investor losses in this space. Wildly popular growth funds are witnessing 6-10% losses for a fund in a single day and are down 60-80% from their highs. Investors and advisors that felt pressured to chase the hot thing have witnessed extreme losses.
On the contrary, The S&P 500 low volatility index hit an all-time high in April.
It has pulled back in recent days but has continued to make higher highs and higher lows over the last two years. The boring Berkshire Hathaway has now overtaken the NASDAQ in performance since the pandemic low.
The speculative and popular ARKK Innovation Fund raced to a more than 250% advantage versus Berkshire Hathaway in the first 11 months of the 2020 bull market. Now Berkshire is ahead by 93% and this is all in just over two years.
While drawdowns are never a pleasant thing, it is worth noting that we avoided many of the potential pitfalls by sticking to a consistent process. Those that felt like they “missed out” remain in a position to continue to grow wealth over time.
For instance, The S&P 500 low volatility index only needs to gain 8.6% to recoup its losses whereas the ARKK Innovation Fund needs more than a 300% gain.