The world is in turmoil!
Although looking at global stock prices you might not believe it.
But let me tell you, despite the insane market recovery, economic chaos and uncertainty are still the order of the day.
And, when you're reviewing your potential investment options, it's not surprising if you feel like you've been dropped in the middle of the jungle with nothing but a survival knife.
As the pandemic trundles on, you may feel it's increasingly difficult to anticipate how the world will look in 6 to 18 months.
• Will we find a vaccine?
• Will the vaccine be effective?
• Will the vaccine be widely distributed in time?
• Will herd immunity be the only option?
• Will the South African government come to its senses regarding lockdown criteria?
These are only a small sample of the questions swirling around in an investors mind.
Here's the PROOF: This recently made R8,848 in just a month (Since the COVID-19 Lockdown)
The truth is, “We’ll only know who was swimming naked when the tide goes out.”
Even as a professional investor, I find myself oscillating between hope and fear.
We know businesses across the globe are taking major hits. Many will be permanently scarred. Others simply won’t survive.
Unemployment is going through the roof and governments are taking on more and more debt to curb the devastating effects of the Covid-induced lockdowns. Too many businesses are inactive. And too many people are suffering permanent damage to their income.
Yet, you might be surprised to find, certain stock market sectors are booming. The tech heavy Nasdaq is just off a record high. Some companies like Nvidia, Facebook and Amazon are breaking all-time highs!
Could it be investors are overly optimistic?
Is this just a flood of cheap money from the world’s central banks boosting up asset prices and making stock market investors rich, while main street once again suffers?
Are we about to see the gap between rich and poor explode across the world?
Whatever the case may be, as Warren Buffett would say: We’ll only know who was swimming naked when the tide goes out.
Now you may be wondering, should I be diving in as well?
Personally, despite the stock market recovery, I’d be EXTREMELY cautious.
You see the problem is, while some company shares might have looked attractive a few weeks ago, as the market recovery took hold, many investors started piling in just because they’re scared of being left behind. This is FOMO on a massive scale. And it looks like they’re jumping in without checking the tide.
A few years from now, you may find that darling tech-stock on a 150x earnings suddenly wasn’t all it’s cracked up to be.
The company, at best, might be worth way less than you paid for it. Of course, it may not even exist in a post-pandemic world.
So, how do you select shares in times like these?
I believe, if you ask the right fundamental questions, you can identify which companies are most likely to survive and thrive in a post-pandemic world.
For example, ask yourself:
1. Was my targeted investment company struggling to gain market share before the pandemic? If yes, what has changed?
2. Is the company over-indebted? Will lower interest rates help or will spotty cash-flows sink the business?
3. How has the management team responded to the coronavirus? Are they taking the opportunity presented by crisis or are they sheltering in a bunker of excuses?
4. Is there going to be a demand for the company’s products as household incomes collapse?
5. Are the company’s earnings correlated or uncorrelated to the rest of my portfolio?
Since the coronavirus outbreak these gains from global financial markets have been pouring in...51.57%... 323.00%... 15.80%... 44.10%... 114.29% most in a matter of days!
Knowing the answers to these questions, will give you the right framework to begin assessing your chosen investment target
If you can’t answer these questions about your investments, you should begin seriously assessing the likelihood of your own survival in the current investment wilderness.
Of course, this isn’t an episode of Naked and Afraid. No-one is forcing you to walk this jungle path alone. If you’d like to speak to one of our advisors simply email firstname.lastname@example.org
with your name and number and they’ll call you back.
This year, Rand Swiss’s managed portfolios have returned over 10% better (in US dollars) than an offshore S&P500 ETF investment. This is after 4 years of uninterrupted outperformance.
You may wonder why I’m so passionate about using a professional. You see I work on a trading desk which supports and services “Online Only” clients.
And I can tell you, I’ve seen time and again how non-professional investors ruin their investments after thinking they’re ready to go it alone.
Yes, online trading costs are cheaper. You don’t have to pay 1% to an advisor. And yes, this fee does add up over time.
But watching amateurs invest is like watching someone who has never boxed before, enter a professional boxing ring because they own a pair of boxing gloves. It just doesn’t make sense!
But if you have your heart set on doing this by yourself. Try this:
Three tips for novice Online Investors
1. Look for companies with strong balance sheets. You want them to be able to take advantage of ultra-cheap acquisitions as other businesses fold. You want businesses which can afford to invest and grow when others are just trying to survive.
2. Look for companies with an economic tailwind. You can’t totally ignore the micro-environment but getting your macro-call correct will de-risk your decision.
3. Be ready for the bumpy roads. Stock markets don’t go up and down smoothly. You need to have enough confidence in your investment thesis to ride through the bad times knowing the good times will come back. If you’re not certain about the investment, the likelihood of getting shaken out in a sell-off is that much higher.
Rand Swiss, Wealth Manager