Felix Prehn, the founder of Goat Academy, believes that many investors are worrying about the wrong things. While news about tariffs and trade wars fills the headlines, Prehn says these issues are mostly “noise” for long-term investors. He explains that understanding what really moves the stock market can help people make better decisions and avoid common mistakes.
What Are Tariffs and Why Do They Matter?
A tariff is a tax that one country puts on goods coming from another country. The idea is to make imported goods more expensive, which can help local businesses. Right now, average tariffs are about 14% to 16%. Some experts, like those at Goldman Sachs, think tariffs might go up a little, but not by much. For most investors, these small changes are already expected and included in stock prices. This means the market is not likely to react strongly to new tariff news.
Why Most Stocks Might Not Do Well in the Next Rally
Felix Prehn points out a problem called “market breadth.” This term means how many stocks are going up when the market rises. Right now, market breadth is very low. This means only a few big companies are driving most of the gains, while many other stocks are not doing well. In simple terms, if you own a fund that includes lots of different stocks (like an ETF or index fund), you might not see big gains. Most of the money is being made by a small group of companies in the right industries at the right time.
What Is an ETF?
An ETF, or Exchange-Traded Fund, is a type of investment that lets you buy a group of stocks all at once. It’s like a basket filled with many different companies. While ETFs can be a safe way to invest, Prehn warns that in times like these, most ETFs might not perform as well as a few top stocks.
How Can Investors Do Better?
Prehn suggests that learning how to pick the right stocks is important. He says that while owning an ETF can help people sleep at night, it may not lead to the best returns. In fact, studies show that about 96% of stocks do worse than government bonds, which are considered very safe investments. This means that just buying a broad mix of stocks is not always the best plan.
The Bottom Line
Felix Prehn’s main message is that investors should not get distracted by news about tariffs or trade wars. Instead, they should focus on understanding which companies are likely to do well in the future. By learning the rules of smart investing, people can avoid common mistakes and make the most of the opportunities in the market.
To learn more about Felix Prehn and his approach to investing, visit the Felix P