How Investors are Dealing with the Coronavirus
If you’ve been following the news closely, you may be a little disheartened by what’s happening in the stock market. The impact of business closures in China and travel restrictions on the European region is certainly taking its toll on consumer confidence and causing many stocks to lose value. Unfortunately, this has led to some investors panic selling stocks under the belief the market will crash and be stuck in a recession for a long period of time. While the markets may not look good right now, there are some great opportunities for those who can hang in there and ride out the storm.
Investors Should Consider Buying the Dips
There are a few companies who may not survive the current calamity, so you should beware of a few stocks. But there are also some quality blue chip stocks that can be had right now for bargain prices while the market is down. If you’re a brand-new investor who’s never owned stocks before, now could be an important time to take advantage of the lower prices and buy in. The best way to start investing is to invest for the long-term by picking stable stocks of companies who have a relatively high amount of cash flow. Keep in mind, the markets could still go lower and news anchors may not be done predicting doomsday. But it’s almost certain the markets will recover, and when they do, some great stock gains will be made. Some stocks that could see immediate gains are healthcare and pharmaceutical stocks.
Consider Dividend Reinvestment
Common shares aren’t the only stocks you can buy. Many high-volume cash flow companies offer preferred stock which has a few differences from common stock including receiving dividends. There are also things you can do with those dividends including having them sent via check or direct deposit to your bank, or reinvesting them. Reinvesting, while still having its risks is a way to increase your holdings by acquiring more shares in the company. Consider that if you are doing this as a company’s stock value is rising, acquiring small amounts of new shares through dividend reinvesting can end up multiplying your returns by quite a bit over time with the potential to turn $1,000 into $20,000, though you need to find the right companies for this. With the current economic hardship from COVID19, some dividends may be put on hold, and dividend reinvesting likely will take time to yield results. But with share prices currently cheap, the opportunity to acquire a lot of them exists.
Look into Options Trading
Another option for entering the market if you feel up to taking some high risk with the potential for high reward is options trading. What is options trading? It is a little like stock buying, but it’s a lot more dependent on the current volatility of the market and it has a lot of different positions you can take that can be a little trickier to understand. But the overall gist of it is you can buy the rights to buy a specified amount of shares before or at a certain date, and if the prices swing the right way, you can make quite a profit by buying and selling the option as allowed by its terms. There’s a lot to learn about options trading, so you will want to do plenty of homework on it.
Basically, there is no getting around the volatility the stock market will suffer from current events like COVID19 and the election later in the year. But it’s always best for investors not to panic and carefully evaluate their decisions when it comes to the welfare of their portfolio.