By now, everyone has heard of the Coronavirus. We are reminded that even though we may be miles across the ocean, we are still one small and interconnected global world. While many people are living in fear, and the global economy is on a decline, there are some who see opportunities amid this crisis. It’s all about perspective: do you see the glass half empty, or half full?
See, while the stock markets are going down, and an overwhelming majority of stock prices are now “dirt cheap,” it is the time to strategize and take advantage of this opportunity. I will only recommend this though if your intention is to hold your investments for the long term. The stock market and global economy operates on a cycle, meaning there are highs and lows. When the market drops, it will rebound in the future. If you are looking to make a quick dollar overnight, then there is no guarantee that you will make any money.
I will share the strategy that I have created below, and will share my rationale for my choices.
- First, make a list of publicly traded companies that you are interested in. It is easier to start with companies whose names you are familiar with and whose products or services you use. If you are not sure if the company you have in mind is publicly traded (those who are on the stock market), then go to a search engine (Google, Explorer, etc.), type in the name of your company along with ticker symbol. For example: “Apple ticker symbol” If the results show the name of your company, along with the ticker symbol “AAPL” and the current stock price, then your company is publicly traded. If you don’t see similar results for your company, then there is a chance that company is privately held.
- Next, go on Yahoo Finance or any other platforms or apps that have credible real-time financial information. Search for your ticker symbol. The results will show the financial performance of your stock over the following periods: 1 Day, 1 Week, 1 Month, 3 Months, 6 Months, 1 Year, 2 Years and sometimes 5 Years.
- Start with the 2 Years view – Does the stock performance have an upward trend? If in the past two years there was an upward trend, then you can move to the step below. If it had a downward trend over the past two years, I would remove from my list. The reason for this is that the stock was already performing badly.
- Then, move to the 1 Year View – Did the stock have a steady increase, or did it fluctuate wildly (sharp increases and decreases)? If the stock fluctuates wildly, this does not mean it isn’t a viable investment option, it just means that you are subject to swings more frequently and your portfolio value could bounce around a lot. If over the 1 year period, the stock had a steady increase, then that means the stock is more stable and less volatile. If I had to pick between the stock that fluctuates, and the stock with the steady increase, I would go with the latter.
- While you are in the 1 Year View, take a look at the return on that stock over the 1 year. This will be stated in percentages. For example, if your stock has a -14% return, then this is not a stock you want. If it has a positive return, for example +14%, then this is one that you want to keep on your list and keep assessing. The goal is to look for stocks that have the highest positive return. It should be noted however, that past performance does not indicate future performance. Just because a stock has positive return over the past 1 year, doesn’t mean that in the next year, it will remain positive. The value could always fall, and the return decline. Be sure to do your due diligence and proper research before buying any investments.
- After you have looked at the 1 year trend and return, the next step is to look at the 6 Months and 3 Months View – Did the stock decline, or did the stock increase over these time periods? Chances are, you are seeing a decline for your stock. I did a quick check (as of 3/12/2020) and noted that The Chlorox Company (CLX) had an increase within this time frame. Most of us are aware that disinfecting products have become a scarce commodity in many stores. As a result of the increased demand for their products, The Chlorox Company is benefiting from this.
- While you are looking at the 6 Months and 3 Months view, do not be discouraged if your stock is not performing well. This is were the strategy comes into play. See, if the stock you have in mind passed the 2 Years, and 1 Year Test, that means that the reason your stock may not be performing well, is due to the Coronavirus outbreak. You should only be considering stocks that have only declined because of the news of this outbreak. What this means is that once the Coronavirus is eliminated and the global economy rebounds, your stocks will start to increase in value, as they normalize. It is not wise to invest in a stock that had bad performance prior to the news of the outbreak. If you are not sure if the stock you have on your list declined due to the Coronavirus outbreak, spend sometime doing additional research on that company.
- You can take a look at the 1 Month, 1 Week, and 1 Day View if you wish. Chances are, they are showing a decline as well. The same rationale as above applies. Your stock choice may have declined due to the news of the outbreak.
So, after you have gone through those steps, and you may have one, or a few stocks left on your list, you may be wondering when is it best to buy the stocks. Well, this will be your choice and will be dependent on your views of how the market will perform in the near future. If you feel prices will continue to drop, then you may wish to wait until it “bottoms out” before making your purchase. If you feel we are currently at the worst of it, and the market will pick up, then you may wish to make your purchase now, and start reaping the benefits of your investments. The choice is yours, and is dependent solely on you.
You may be wondering, how do you buy investments if you have identified a few stocks that you are interested in? There are many apps available for those who are beginners to advanced, example: Stockpile, Robinhood, Stash, Acorn, among others. It is your duty to ensure that you understand the terms and conditions of these financial apps. Some may allow you to buy fractional shares (meaning if the stock costs $100, but you only have $5 to invest, you can buy $5 worth of that share), while others may require you to buy a full one share. Some may require a minimum monthly investment amount, while others allows you to invest at your own pace. There are so many variations with what is offered, so be sure to read and understand before you invest in anything.
Well, that’s it for this post! Stay safe and make good financial decisions that will build your net worth and secure your financial future.
Disclosure: The Robinhood link above is a referral link. If you are signing up for the first time, you will receive a free stock (no purchase required) and I will also receive a free stock.