S&P hits new milestone; day-trading & website update 2021
S&P 500 to the moon
On April 1st, 2021, the S&P 500 broke 4,000 for the first time and closed at 4,019.87. This represents a new milestone for the S&P 500 index, which also happens to be the most popular and closely followed stock market index in the United States, and one of the best indicators of overall US stock market performance. This milestone comes barely one year after the major COVID-related stock market crash of 2020 and one of the fastest subsequent market recoveries in history. It also comes less than two years after the S&P 500 broke the 3,000 barrier for the first time.
For some historical context, here are various closing milestones of the S&P 500, the date first achieved, and the number of days it took from one milestone to the next. A more exhaustive list can be found on the Wikipedia page dedicated to this topic. Note that I used the total number of days whereas Wikipedia has a similar table showing the number of trading days (i.e., excluding holidays and weekends).
| Milestone | Closing Level | Date first achieved | Number of days from previous milestone |
|---|---|---|---|
| 100 | 100.38 | June 4, 1968 | N/A |
| 1000 | 1001.27 | February 2, 1998 | 10835 |
| 2000 | 2000.02 | August 26, 2014 | 6049 |
| 3000 | 3013.77 | July 12, 2019 | 1751 |
| 4000 | 4019.87 | April 1, 2021 | 659 |
Of course, with the nature of compounding growth, static milestones are likely to be reached faster and faster. For example, 4,000 represents a 33% increase from 3,000. Assuming 10% CAGR, it would take around 3 years to achieve this. However, the next milestone, 5,000, is only a 25% increase from 4,000. If growth rate remains at 10%, it would take only a little more than 2 years to hit the next milestone.
Nonetheless, people are once again questioning whether the S&P 500 and stocks in general have become too inflated in value, and whether another correction or market downturn is imminent. It is also true that the stock market experiences a prolonged downturn about once every ten years, and the last such downturn was in 2008 (apart from the short-lived 2020 crash). As always, the future is unknowable. More often than not, sitting on the sidelines “waiting for a dip” is a foolish errand. It is a form of market timing that is extremely difficult, if not impossible. I’ve read stories on various online forums of people waiting for years after 2008, reluctant to re-enter the market for fear of the next big crash. Some of them are still waiting.
An often-repeated story, originally published in 2014, is that of a hypothetical investor Bob, the “world’s worst market timer”. Over a period of 35 years from 1972 to 2007, Bob timed his investments in the S&P 500 so poorly that he only invested lump sums into market peaks immediately preceding a crash. This represents the pinnacle of bad luck when it comes to investment timing. In total, Bob invested $184,400 into the stock market over his lifetime, only to see his investments lose 30 - 50% immediately. But Bob never took any money out of the market and stayed put. As of 2013, Bob’s investments had nonetheless grown to $1.1 million. And as of 2021, Bob would have $2.7 million. It just goes to show that if your investment time horizon is long, you shouldn’t sit on the sidelines for fear of a market crash.
Day trading update
I briefly tried some day trading during the March 2020 market crash, which I chronicled in this article. Since that experience, I decided to take it upon myself to learn more about options trading. Starting January 2021, I began actively trading on a consistent basis. Please note that the statistics surrounding day trading remain abysmal - somewhere around 97 to 99% of day traders do not make profits and all forms of active investing are unlikely to beat passive, index investing in the long run. I am doing it not with the expectation of profit, but rather to educate myself. Sometimes, its an expensive lesson.
For Q1 of 2021 (January 1, 2021 to March 31, 2021), here is a summary of my trades and the associated profits or losses:
Brokerage: Fidelity. Software: Active Trader Pro.
Starting capital was approximately $40,000 and total realized gains, after 3 months, was $4,904, or slightly more than 10%. Please note that this does not include any unrealized gains or losses from positions that have not yet been closed. There are a few individual stock trades in there, but the vast majority of my trades were options trades, specifically “covered calls”, “cash-secured puts”, and “credit spreads”. I’ll discuss these strategies in more detail in subsequent articles. My goal is to provide an update at the end of every quarter, and ultimately see what the results are after a full year of trading. By the way, there were too many trades to fit into one screenshot. If you want to see a full list of what I traded, feel free to download this excel file.
Website update
In other news, this blog has been up for about 4 months now. My goal is to continue posting finance-related articles which are enjoyable or informative. I added an Investing 101 page (also available on the navigation menu), which will be a series of more beginner-friendly articles, designed for people with zero investing knowledge (we all have to start somewhere!). I also updated the Books page to include some other recommended books, and I’ll likely expand this list in the future. Please consider subscribing to the newsletter to get a notification every time a new article is posted. Thanks for reading, and happy investing!
