Investing, Reflections

My 3 Thoughts on Yesterday’s Deepest US Market Decline Since June

by Chris Susanto 

4 September 2020

Yesterday (3 September 2020), the US market had its deepest one day decline since June.

The S&P 500 and Nasdaq had their deepest declines since June 11 and for Dow, it was their biggest decline since June 26.

Here Are My 3 Thoughts on Yesterday’s Deepest US Market Decline Since June:

1. The Market Is Unpredictable

If there is one thing that I have learned through my experience in the stock market is that the short term market movement is unpredictable.

The longer-term market movement, however, is more predictable, provided one does not pay an exorbitant price to participate in it.

So I have always gotten my gains not for from predicting the short-term market movements, but from betting on the long-term direction of the business. 

See also: Our free telegram channel for high-performing professionals who wants to learn investing.

2. We Only Know Who Is Swimming Naked When The Tide Runs Out

Two of the human biggest enemy in investing is greed and fear.

In this Bloomberg article that was just published today titled “Day Trader Options Frenzy Turns Ugly in $730 Billion Nasdaq Rout”, it mentioned the unexpected movement of the market likely resulted in many short-dated calls going bust.

“A call with a $125 strike price on Apple Inc. shares, expiring tomorrow, plunged 89% as shares sank 8% to $121. A bullish wager for Tesla Inc. to reach $500 by Friday’s expiry lost 90% as the stock dropped 9% to $407. And a call on Zoom Video Communications Inc. with a strike price of $420 became essentially worthless as shares hit $381.”

It is just one example of how potentially an unexpected movement in the market – in the short term – can blow up in someone’s face.

Primarily because in my view, these are gamblers, not investors.

Also read: Will The Stock Market Crash One More Time in 2020?

3. Valuation Matters

Ultimately, valuation matters.

How I reduce my downside risks in investing is that I only invest in things that offer a margin of safety.

Meaning I try not to overpay.

Be it growth stocks or not.

Especially not after it has run up too much and the valuation starts to not be mouthwatering, investment-wise.

For example, I think Apple and Tesla already have such a huge run-up – so it makes sense that yesterday, those two fell 8.01% and 9.02% respectively.

I do not have those two stocks – but I have Facebook, and it did not fell as much – just 3.76%.

My other bigger position – which I have been in from a few months ago – Carnival Corp, is actually up 5.21% yesterday.

Also read: How to Get Rich by Investing in Stock Market? | Re-ThinkWealth

In Conclusion

I think valuation should form a cornerstone of every investor’s decision of what to invest and when to buy, hold, or sell their stocks.

Without understanding valuations and investor’s mentality, we are blind.

I understand that for certain amazing companies, there will be a premium that has to be considered to be paid to participate in their growth. But I am always cautious as to what is a reasonable price to pay for that premium.

Remember, to finish first, we must first finish.

Yesterday’s minor stock market decline is just a reminder for us to stay rational in our investment journey.

Also read: Thinking, Fast and Slow Book Summary (What I Learnt As An Investor)

Was this article useful for you?

If it is, would really appreciate it if you could take one minute to share it on Facebook.


The information provided is for educational and general information purposes only and is not intended to be personalized investment or financial advice. We make no promises as to the accuracy or usefulness of the information we present.

Important: Please read our full disclaimer.

Disclosure: I am/we are long on Facebook and Carnival Corp.

Especially For Ambitious Professionals and Business Owners

  • Our Telegram Channel – If you’d like to hear interesting stuff daily on stocks, business, economy, and value investing knowledge, please join our free telegram channel here.
  • By Invitation-Only Mentorship – We specialize in coaching (1-on-1) ambitious professionals and business owners looking to learn how to invest in stocks safely and sustainably. The results from our mentees have been amazing so far. Learn more about The Mentorship here.

More from Chris

5 Investing Lessons from The Three Kingdom

5 Investing Lessons from The Three Kingdom

Just finished rewatching all 95 episodes of The Romance of The Three Kingdoms – Although this is a classic Chinese historical war movie that is likely dramatized, there are a lot of lessons to be learned from it – for value investing purposes. [1] No matter how good we are or how much […]

read more
How I Made 50% in 6 Months with Care.com

How I Made 50% in 6 Months with Care.com

Today I want to share with you my thought processes when I first initiated a position in Care.com (NYSE: CRCM) on 28 May 2019 – and less than 6 months later on 20 December 2019 – overall at an average cost of $10.07, I sold off all of it at $15.05. My valuation for care was higher than […]

read more
Peter Lynch One Up on Wall Street Summary | Ultimate Guide

Peter Lynch One Up on Wall Street Summary | Ultimate Guide

Peter Lynch’s one up on wall street book was one of the first investing books that I read. I probably first read the book when I was about the age of 20 or 21, and now, after about five years in the market, I can tell you that the lessons hold. Who is Peter Lynch? Peter Lynch is a legendary […]

read more