Author: Danny Popescu | April 9, 2020
While COVID-19 continues to spread, governments around the world are taking drastic monetary measures to prop up their respective economies. This week, investors tried to comprehend the impact these events will have on global markets. While the masses did more selling than buying this week (some sales were forced sales due to margin covering), billionaire investor, Bill Ackman, called stocks “bargains of a lifetime”, and Bloomberg noted that Carl Icahn & Warren Buffet added over $1 billion combined to their equity holdings.
I, like many of our clients, did some bargain shopping as well, pressing the ‘buy’ button both Tuesday and Friday. Should stocks continue to decline (and I hope they do), I will continue to add to my equity holdings over the coming days/weeks.
Here are some wise tips from one of our advisors in Ontario.
BUY LOW AND SELL HIGH!
Almost everyone knows this intellectually BUT few practice it. Why? FEAR.
‘Fear is the mind-killer’ (for SCI-FI geeks like me)
Question: if you own preferred shares (issued by banks and utility companies) that pay you 4-6% per year in TAX ADVANTAGED income BUT are currently selling at a SUBSTANTIAL DISCOUNT because interest rates have fallen to unheard of levels in North America do you sell now or do you spend the income knowing interest rates will recover as this situation fades?
Question: if you own a bond/debenture (paying you 5-6% a year) that MATURES in 2-4 years and because of our current situation it’s current-temporary selling price is $60-80 dollars instead of the $100 (you will get at maturity) do you sell it now or spend the interest income each year and wait to get your $100 at maturity?
IMPORTANT TO REMEMBER: your statement currently reflects what you can sell investments for NOW during a period of crisis, NOT their intrinsic value or what they will be worth once we move beyond this.
For those in retirement, focus on the income generated by your investments and what opportunities are out there for above-average yield right now.
For those saving for retirement, focus on where investments will be 1-2 years out and what opportunities are out there for above average gains.
MAKE NO MISTAKE…JUST LIKE OTHER PERIODS BEFORE THIS HOW YOU ACT NOW WILL DETERMINE YOUR RESULTS DOWN THE ROAD.
I encourage everyone to increase their knowledge so they can reduce their fear and ACT!
Have a great weekend,
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