First off, Happy New Year to everyone—I genuinely wish you and yours a very happy, healthy and prosperous New Year.
Frankly, I’m not huge into New Year’s resolutions; if something is good enough to adopt, in life or investing, there’s no reason to wait until the calendar flips. Indeed, I sort of liken the start of the year to the start of a football game—most teams start the first quarter with a well-thought-out game plan, but within a few drives, the script often goes out the window, with coaches and players scrambling to do whatever they can to win.
It’s not dissimilar when investing, as most people start out with a handful of goals and targets for the year … but within a few weeks, most of those are forgotten as we adjust to what the market throws at us.
So let me just briefly chime in today with a few big-picture growth investing strategies to consider as we ramp into 2023:
5 Growth Investing Strategies for 2023
- Forget about Last Year: In 2020, I was a hero, up north of 60% in my Cabot Growth Investor advisory’s Model Portfolio. In 2021, I was a dud, up just single digits as growth stocks lagged and (frankly) I made some snafus. In 2022, I was heavily in cash, helping subscribers avoid much of the bear market. But whether you were a hero or a zero last year, that was last year—put it on your long-term track record, sure, but don’t rest on your laurels (if you did great) or sulk (if you did poorly). Flip the page.
- Win Big, Lose Small: This is something even the best investors lose sight of—no matter what you’re playing with (growth stocks, value stocks, options, whatever), winning big and losing small is going to be the core reason you make money. Honestly, I’m always surprised at how many frustrating trades, round-trips and earnings duds come around … and yet, at year’s end, you still made money, often big money. Long story short, remember to cut your losses but aim big (or at least bigger) with your winners.
- Choose the Best, Leave the Rest: Sometimes, the market environment is such that you can throw a dart and make money; we all love those times. But this … isn’t one of those times. You don’t have to invest in blue chips, of course, but it’s almost always best to avoid the junk pile—for growth stocks, stick with those that have great stories, numbers and (at least resilient) charts, and let others toy with the speculative stuff that often tempts but usually disappoints. (A side benefit of this is you’ll have more conviction in the stuff you own, which will allow you to hold on through normal, tedious shakeouts—which in turn will allow you to develop bigger winners.)
- Follow a Plan: There is no perfect plan, just like there is no perfect investing system. But you’ll come out better if you have some roadmap that guides you rather than just going with your emotion. Obviously, if the evidence really changes (huge crack of support, trend change in the market, etc.), you should change as well—but for the most part, it’ll be best to let things develop.
- Stay Optimistic: I’ve been at Cabot now for 23 years, and of course, invested some before that, and during that time I’ve seen two of the biggest bear markets ever, a terrorist attack on our country, various wars and skirmishes, a housing/financial meltdown, rising interest rates, huge natural disasters, presidential impeachments, an oil crash, a trade war with the second biggest economy in the world, massive fiscal deficits and a pandemic. Through it all, our standard of living has (generally) gone up and the market has presented some great opportunities—especially in firms offering new, cutting-edge technologies and products. There are down times (if you’re a growth investor, you’re in the middle of one right now), but let there be no doubt that there will be great opportunities ahead. So be sure to keep your eyes open for them, and apply these growth investing strategies when managing your portfolio.
As for the current market, one note I’d like to leave you with is that making (and keeping) money right now is hard. For most trades, there’s not much of an edge. And even if you land a winner, few names are running away on the upside, instead making a decent move (10%? 15%?) and then pulling back and chopping around. For the most part, the juice isn’t worth the squeeze. That argues for a general cautious stance, and if you do develop some winners, raise stops and consider partial profits.
What are your favorite growth investing strategies? Tell us about them in the comments below.