Investments
Opportunity
I mentioned the other day about the stock market tanking… well, it got slightly worse, with S&P downgrading the USA’s credit rating yesterday. But, being a 20-something, I can see the bigger picture. I’m no where near retirement, so any money I lose in the short run, I can make up over the long term.
Which brings me to the power of this opportunity. I can now buy stocks, at a discount and then wait for them to recover to make a return.
Add onto that, one thing a couple people I respect keep saying, is its time to fully run with this opportunity. And by that, the suggestion has been to get an investment line of credit, and put that into the market as well. So I play with even more money, and see bigger returns over time. Plus, interest rates are so low on a line of credit, that the return I’d have to make back to make it worth its wild is quite minimal.
Risky? Yes — afterall, the stock market is basically legalized gambling.
But, being young, from a financial perspective, its an interesting idea to ponder. I have a bank student loan with a $25k limit on it, where my interest rate it prime +1% (which is almost nothing). The loan is almost paid off… but I have access to it still, and can pull out the entire $25k and put it into the market. This would make my monthly payments about $150, which I can easily afford.
Now, the goal wouldn’t be to keep this 25k loan in the market for years, but rather, until the market recovers again. Would probably be a year in total. In which time, I’d cash out, and pay off the student loan all together.
I’d also go for fairly blue-chip stocks and mutual funds, and at most do $5k in any given company, as well as diversify.
I’ve been kicking myself in the last recession, that I didn’t jump on the chance aggressively enough. Now, it seems I have at least a bit of a do-over.
Is this smart, or is this too much risk to do?
Market Tank!
The stock market, over the past few days, have basically taken a turn for a worse. The good news is… I liquidated a lot of my positions back in July, and just sat on the money! The bad news is, the stuff I didn’t liquidate… is tanking.
While I hate to see the economy go into a free fall (we saw this waaaaay to recently just 2 years ago), I do like the opportunity to buy a bunch of stock again, at a low, and watch it climb over the following year.
As Warren Buffett said, “”Be Fearful When Others Are Greedy and Greedy When Others Are Fearful.”
Anyone have any game plan for the current financial situation? Hold onto existing? Liquidate? Invest for the first time?
Stock Market Decision
My last post was about how I’ve been getting nervous in the market. In retrospect, of about 4 weeks… had I acted then, and sold a lot of my stocks, I would have not lost a lot of money. D’oh
Earlier this week, I did make that call finally. I’ve been doing a lot of reading on the market, as well as looking at how the market typically trends during the summer month, and everything is looking like its going to be very soft. Add on top of this the recovering in the USA is stalling, and the on-going international issues, I ended up selling 2/3rds of my portfolio.
I sold the stocks where I’m either up, or not down by much (eg: down by ~3%). The ones where I’m significantly down, I kept and will just hold on to, for when they do actually recover — I hope.
My immediate plan is just to sit on the money until about August, where I’ll re-buy (assuming theres no impending end of the world). I figure at this, the summer will cool the markets, and I’ll be able to buy more, for less.
For money that is not locked in my RSP account, I’m putting that on my student loan. I figure I can rid myself of this student loan by the end of the year. Its been something I’ve wanted to do, but has never made much sense (it saves me 4% in interest, where in the market I was making a fair bit more).
With my feeling the market is going to yield less than that for the next several months… back to the student loan, for an instant 4% return.
Is anyone else starting to feel the same way? Or is the ‘sit and hold’ your ideal way to go?
Stock Market Downs
I’ve been investing in the stock market for the past couple of years (largely after the low point of the recession). I’ve done fairly well over the few years, but lately, it’s going sideways. With the trouble in the middle east, ongoing concern over the USA’s debt ceiling, troubles in Europe, etc… I’m starting to drip back into the negative.
While I know I shouldn’t watch the market as much as I do — its painful to see days where I swing down $1000. I’m almost starting to worry that we’re drifting back into a recession around the world. Too many countries are up to their eyes in debt, along with ongoing politics around it (you know, talking about the problem, rather than doing anything to solve the problem.)
I’m almost at the point I’m going to start switching into lower-risk investments, and switch back to paying off my student loan. Throwing more money into the stock market at this point, is making me uneasy. (Even though, everything’s cheaper now, and I could see better returns.)
Does anyone else have this problem? How do you manage it? Just ignore it and let it ride out, or actively sell and buy different stocks?
Investing in Opportunity
One of my ongoing hobbies has been playing investing in the stock market. I’ve done fairly well over the past couple of years, as I started when the market was at a low.
Now, that the market has made much of its worth back, its harder to just ‘throw’ money at something, and see a 15%+ return within a short period of time, but its still proving to be worth it for me.
One of the strategies I’ve been taking as of late, is to invest in companies that have been hit by disaster or bad public relations. Both of which, make investors nervous, thus, drives them to sell their stocks, resulting in lower share prices — all, in typically an overreaction to bad news, rather than the company’s underlining worth.
An example of this, is BP, and their oil spill over the summer. No matter where you turned, everyone was talking about it, and the two months it took to finally plug the hole. This, cause SUBSTANTIAL harm to BP’s reputation and stock value, plunging it from a 52 week high of $61/share, to a low of $27. I, as an investor, decide to buy shares and got in around $35 — here, the international spotlight has been on the company and created substantial bad will towards them, however, their underlining company still had physical assets, and was worth money. Sure, they’d take a hit in their recovery efforts, and in lawsuites, but it does not negate the fact they’re a profitable company. I’m up 28%.
Other examples I’ve been looking at, as of very recently, is the controversy around Nuclear energy, particular in light of the tragedy in Japan. While the entire situation is stunning to watch (as you never expect it to happen), it does not defeat the underlining reality of the benefits of nuclear energy. In turn, when you look at the stock market, companies that supply nuclear components, have taken a major hit too — here, I’ve also invested very recently, hoping to make money off the upswing as investor confidence is restored.
While investing like this is probably not everyone’s style, it seems to be working for me… I know there are a lot of ethical considerations around this, both pros (helping a company keep its worth, thus, reducing the chances of layoffs, ensuring their suppliers/distributors stay in business, etc), and cons (supporting ‘bad’ companies, or taking advantage of devastation), but I think the overall good is greater than the bad.
What is your take on this? Have you done it before? Would you do it?