Let’s just imagine this: If your boss decides to increase your salary by 100%, what would you do with the extra money? You probably clear some of your debts, put some into savings, and use the rest to get something you have always been thinking of getting.
After a few months, your nice boss decide to give you another 100% raise, so your salary now is 4 times your original salary. With the extra cash, you may want to invest more into stocks or properties, to earn more income.
As you have more cash on hand now, you are more willing to pay more for the stocks/ property that you have always wanted and that drives up the prices of the stocks/ properties that you are buying. What if everyone else also has plenty of cash and all of you are fighting over one property? The highest bidder wins and property prices start to get higher and higher because of all the rich buyers trying to outbid one another.
What if you still have money left after buying your properties or favourite stocks? Everything that is fundamentally sound is expensive and overpriced now. You decide to buy on stocks that are of lower prices and look to have plenty of upside. You buy them because you think they are going to 10x, 20x or 100x, just like the Google, Apple or Tesla of yesteryears. And soon, the prices of these stocks start to shoot up as well.
The above scenario was what happened in 2020 and 2021, where the market is injected with hot money from the Federal Reserves’ money printing machine. With so much money on hand, investor can afford to be the highest bidders and to take on more risk buying specualative stocks. However, all these will be coming to an end in 2022.
In 2022, the Federal Reserves is going to stop printing money and pumping them into the economy through purchase of bonds from the US government. With less money being pumped into the market, it seems like getting a 75% pay cut and going back to where you begin and getting paid your orginal salary. With less money on hand, many investors will feel like a middle-income employee where finances are tight. When it comes to investing, they are likely to go for value-for-money purchases because their budget is limited now.
These value-for-money investments refer to companies that are profitable, have good cash reserves and likely to withstand interest hike and inflation in the coming months. The speculative stocks will fall out of favour as investors turn from risk-on to risk-off, now that they have less cash on hand.
The market is likely to stay sideways for most periods as there is a lack of buyers trying to outbid one another to push up stock prices. There will be periods of a downtrend as negative catalysts come from the implementation of the policies.
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Keen to learn about options trading but do not wish to pay for expensive courses, this newbie guide will help gain the knowledge and fundamentals to understand options better. And it’s totally free!
The Newbie’s Guide To Options Trading
The LEAPS Strategy has helped me make more than USD120,000 in 2021. Here’s all you need to know about this strategy that can help you increase your wealth exponentially:
The Ultimate LEAPS Options Thread
Looking for ideas on what stocks to invest in or which stocks to trade? You can take reference from what I have been buying or selling. I try to update them as soon as I can in this section, as well as share my thoughts behind executing these trades:
MY TRADES
Excited to start your trading journey or perhaps try out with a paper trading account to build your confidence in trading? Check out this step-by-step to help you get started:
How To Buy Options on Interactive Brokers (Step-By-Step)
I watched tons of videos on YouTube since 2020 and if you are wondering if there are any useful channels that you can subscribe to for learning market trends, TA, FA, check out this compilation here:
My Secret Weapons For Options Trading: I Watch These YouTube Financial Channels Every Day
I concluded my first year of options trading with more than USD160k of gain, see how I do it and the capital I use for every month to give you a sensing of the percentage yield I get out of my gains:
1st Year Options Trading Recap: The Journey Towards SGD$217,509 Profits In 2021
This blog is as authentic and as transparent as I can share, I do not just show the wins and hide the loss. I have made some very bad decisions in the first 8 years of investing and paid a huge price for them. Here is the loss I have accumulated during these years. I hope you learn some lessons from my mistakes.
I Cut $135,715 Worth Of Losses In The Last 1.5 Months
Learning Investment With Jason Cai 