Everyone is talking about buying the dip, but what is the best way to do that? I’m not an investment advisor, but since the stock market has taken a serious downturn, now may be a good time to consider your overall investment strategy. That’s why I’ve invited investing expert, Lawrence Hamtil, co-founder of Fortune Financial Advisors, to chat with me about the ups and downs of investing after the recent stock market collapse. Listen in on this discussion to hear the pros and cons of buying the dip, investment timelines when buying today, and exceptional industries that have stood the tests of time.
Now that the stock market has dropped everyone is talking about buying the dip, but how should an individual investor approach this? Lawrence recommends sticking to your investment strategy. You need to have an idea of how much of your portfolio you want committed to a particular sector. Once you establish that then it is important to stay within the confines of your plan and rebalance as necessary. He points out that sometimes rebalancing can be a challenge, but the best time to rebalance is when your portfolio is off-kilter. Stay within your target allocations rather than focusing on the daily moves of the market.
Investing in today’s market can be a bit nerve-wracking, but in the long-term, it can really pay off. The stocks of many large corporations are down 20-80%. But that just means that you are getting more for your money now than just a few months ago. The investment that you make today won’t immediately bear fruit and it could take up to 5-10 years to really pay off. Rather than trying to pick individual winners and losers a better strategy is to make broad sector bets.
It is important to understand how a company drives revenue before you purchase their stock. Some important questions to ask are: How do they compete? How does the company react to crises? And how does buying that stock fit into your individual thesis? Don’t just study the company before you invest. It is important to study the behavior of the company while you hold the investment. Listen in to hear what else you can consider when investing in individual stocks.
We all know that many companies’ valuations have taken a nosedive, but there are some exceptions to note. Tobacco, food, and defense are some examples of industries that are insulated. Some of these are historically undervalued or underappreciated. Think about what can be learned from this downturn. How will this affect your investment strategy going forward? Keep your eyes open to see which companies survive and why.
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