Is the market really that irrational right now like some people claim?

by jsusran

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  1. Retail:
    I personally know a lot of people, even some that can’t tell the difference between a stock and a bond, pumping money into the markets.
    If you have a job and you can’t go out, you save a lot of money every month, what’s the best thing you can do with it besides expending it (can’t go out)? Investing!
    Everywhere I go on the internet there are ads about opening a brokerage account and even some people that haven’t talked to me in years asked me how to open a brokerage account.
  2. Major market discount:
    Buying at a discount is the best way to earn a high %. How many people have lost money buying the market when it is -20% or -30% and then hold?
  3. What else are you going to do with your money:
    Bonds? How many of us actually have access to the bond market? Most retail traders only have stocks and options as financial instruments at hand.
  4. The Fed has your back:
    No explanation needed here, they are pumping trillions into the (market) economy.
  5. The market is forward-looking:
    Even if the real economy is in shambles today if you could invest right now knowing that the market will be 5 or 10% higher in ONE year, would you do it? Where else could you get that rate of return in one year?
    The only reason not to invest today is that:
    a) You think that the market will never go up again, or at least in 5-10 years
    b) You think that the market is heading for a downturn and you want to buy at a discount, that requires skill to time the market (and it already happened back in March)
    Maybe because there are a lot of retail participants right now the market may seem irrational, but it makes sense to me.

Thanks for reading.





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