I bought my first shares in the midst of the 2008 financial crisis.
My first buy was Old Mutual shares, and the price rose by more than 211% in the 18 months following my buy…
I rolled some of my returns into a property company, and an industrial stock - in the end I turned a couple thousand rand as a student into enough money to pay for my studies, put down a deposit on my first property when I started working, and got a comfortable head start in life.
Just like back then, I believe today marks a great opportunity.
Markets have crashed to unprecedented levels. Many smaller companies are at 10-year lows even though they are still operationally sound with cash in the bank and revenues flooding in.
Here's how you too could bank fast gains of R5,190, R2,517 or even R1,141 from the smallest market movements -
up or down
Three reasons why today’s stock market is ripe for the picking
Reason #1 - Stocks are on sale
While the overall stock market has certainly surged higher since the coronavirus market crash bottomed in March, there's good news: many great individual stocks are still on sale. Most market indices still trade substantially lower than they did before the coronavirus brought the economy to a screeching halt and sent the market plummeting.
Sure, there's no guarantee the market won't fall again in the near future. But for investors willing to hold stocks for the long haul, they can buy into the stocks at a much better price today than they could earlier this year.
Take Zeder Investments for instance…
According to its latest figures the company’s “Sum of the Parts” value is 358c per share. At the same time the company’s share price sits at a mere 192c. That means it is selling at nearly half price with the discount per share at 46.3%.
At the same time the company is DEBT FREE with R1 billion in the bank. That’s a third of its market value in CASH. It could use this cash to invest in growth projects for its current portfolio of investments, make a new stellar investment at the market bottom, or buy back shares at these ridiculously low levels.
Reason #2 – Today’s situation might be unique – but its not the only crisis investors have ever faced
How does investing in the midst of World War 2 sound?
I’m sure that sitting in a bomb shelter in 1942 London did not inspire investors to jump up and pile the money they had left into the stock market. But here’s the thing – World War 2 was the start of a massive bull market.
On 28 April 1942 the Dow Jones in the US hit its lowest point since the great depression level of 1934.
Then the market turned and four years later the Down was up 130%.
Similarly, countless different crises have happened over the past century.
But life goes on, businesses survive, thrive and grow – even following these crises.
The coronavirus' impact on the economy was undoubtedly severe and startling. Unemployment has skyrocketed, and parts of the economy have completely halted.
But in three to six months’ time infection counts in South Africa should’ve peaked, declined and much of the country could actually have herd immunity by then. And, a vaccine could possibly be ready then as well.
Irrespective of the exact timing – this too shall pass.
But shares won’t always stay at 50% discounts or at a ten-year low…
Reason #3 – Timing the market is a fool’s errand
The most important reason why now is a good time to buy stocks is because it's arguably impossible to time the market anyway. Since there's no way to know where the bottom is or when the next crash is coming, investors should refrain from timing the market entirely.
Based on valuations there are times you should be more cautious. And there are times to be more aggressive. But to think you can predict the exact bottom and exact top is impossible.
What’s more important is being in the market. That’s because (based on research done in numerous studies) if you miss the 5 best days of a year when investing you lose out on around one third of the growth for the year.
Missing the 10 best days means you lose half the growth for the year.
So, stop sitting on the side-lines and consider buying stocks now.
Of course, don't invest money you need to support yourself through the crisis. This must still only be money you theoretically could afford to lose. In addition, plan for (and even expect) major declines in your portfolio – these happen, as there's no telling when the next major market crash is coming. Anything can happen in the near-term.
But more importantly – expect upswings to follow downturns.
Here’s to unleashing real value,
Editor, Red Hot Penny Shares
Over the coming months, I wil be publishing the penny stocks best positioned to rebound in my newsletter, Red Hot Penny Shares. If you wish to try it risk-free for 90 days and get all my research effectively free for the next 90 days, then go here