Praetorian Capital: The Blowoff

Investing involves tradeoffs. And investors need to decide not only what to own, but how to allocate what they own. Index investors simply buy the market based on its weighting. This approach has worked well in the past year.

That’s because market indices are typically weighted by market cap. Bigger companies carry a bigger weight. With big-cap tech stocks leading the market higher, that’s led to great returns.

Investors who leaned heavily into the big-cap tech stocks have done even better. However, such gains can lead some investors to feel like they’re missing out.

That can mean a lot of money pouring in right at the top. And once all the buying demand stops, shares that have been soaring higher can drop quickly.

So far this year, big cap tech stocks have screamed higher. But investors who get in with a fear of missing out may end up being the last ones in.

It’s possible this could be the sign of a short-term “blowoff” top in the market. Such moves can lead to big pullbacks before a healthy rally can continue.

In short, investors who feel that they’ve missed out on today’s big growth stocks should just exercise patience instead. A better buying opportunity will come following a possible blowoff top.

And there are plenty of companies that aren’t making new all-time highs that offer better value and growth today.

To read the full analysis, click here.