Well shit! That got out of hand quickly! Remember that blog post of mine you didn’t read from late Jan where I said nobody knows when the next recession will hit…well, here it is…or at least a 30+% correction…either way, the market has tanked and there’s a buying opportunity of a lifetime (or at least for a market cycle…aka, until the next recession)! This post is going to focus on the What Now?
So, you’ve been sitting on some cash….or you haven’t paid attention to your brokerage account or IRA/401k in years…now is a good time to do something about that! Remember in circa 2014 all the people who were all like “Damn, I wish I would’ve thrown money in the stock market in 2009, I’d be fucking rich!” Well, that could be you in 3-5 years if you sit on your hands and do nothing now! But, since you read my last post, you’re better educated on basic market terminology and you have some money loaded in a brokerage account! Next, I’m going to tell you about some stocks/ETFs I’ve purchased in the last few weeks and am looking at buying in the next few weeks and months.
First, I’d like to start by saying that before getting in to the market, it’s best to speak with a financial advisor so they can put together a holistic plan for you and your future! Second, it’s important to remember that buying individual stocks at a time like this comes with REAL bankruptcy risk. It’s way too soon for any of us to know how long this economic shutdown will linger and the magnitude of its effects on companies…if it lasts more than a couple of months, there’s a very real possibility that some large corporations will face bankruptcy. This is why I personally don’t take a large position in any one individual stock…all stocks I’ll mention below make up somewhere between >1-3% of my overall portfolio.
Cool, now lets buy some fuckin’ stocks already! (Stock tickers will be in parenthesis)
The safest way to play the recovery of the market is via ETFs and mutual funds. Personally I don’t mess with mutual funds and while ETFs and mutual funds both diversify risk by allowing you to buy a basket of stocks within one fund, they have different tax implications so talk to a financial advisor if you’re concerned about your ETF/mutual fund investments and taxation! For fucks sake, enough mumbo jumbo boring tax talk, lets get to it!
Market ETFs allow you to buy an ETF that tracks one of the major indices like the Dow, S&P 500, Nasdaq and Russell 2000. Personally, I use the S&P 500 as my “benchmark” for investing and rate of return so I tend to purchase the iShares Core S&P500 ETF (IVV) or the Vanguard S&P 500 ETF (VOO) which have an astronomically low expense ratio of 0.04% and 0.03% respectively. Buying these ETFs, especially if you dollar cost average over time, will allow you to get the “market rate of return” over a period of 10-30 years. If you want a Dow ETF (DIA), Nasdaq ETF (QQQ) or Russell 2000 ETF (VTWO), here’s some good options. I dabble in the QQQ but don’t mess with DIA or VTWO. The Dow, IMO, which you didn’t ask for, is an old, old cow which needs to get taken out to pasture and put down…it’s 30 stocks, who cares about the Dow, seriously 😉 anywho, moving on to…
Sector ETFs are a great way to invest in, you fucking guessed it rockstar, a specific sector of the market without having to cherrypick individual companies. Think financials, healthcare, biotechnology, etc. For this market rebound, I’m looking at the sectors which have gotten absolutely crushed in the fucking face (that’s two fucks in one paragraph about investing)! Think anything related to travel and leisure…airlines, casinos, resorts! Here’s what I’ve bought/am looking to buy in the near future!
Someone been telling you to buy Delta or Southwest or American Airlines…fuck it, buy them all with the airline ETF (JETS) and spread your risk out among all the airlines. JETS holds 35 different airline stocks with Southwest, Delta, United and American making up just under half of the ETF on a percentage basis. Even with a 19% gain today, JETS is still over 50% below it’s recent high from mid Feb!
Thinking about hitting the craps table!? Good luck, all the casinos are closed and their stocks have gotten annihilated during this market fisting! Fortunately you can buy in to the casino and gaming sector ETF (BJK) and hopefully catch a hot streak as the market rebounds. BJK has 45 holdings and currently sits about 50% off of it’s recent high in Feb. BJK pays a pretty solid dividend as well…but it’s worth noting that the casinos could potentially cut future dividends in the near-term due to their stock price fluctuation and market turmoil.
With interest rates being low and the market pummeling banks have S-T-Ruggled in 2020, but fear not, the financial sector ETF (VFH) allows you to purchase 427 different financial institutions in one nice little package! No need to choose between Bank of America and Wells Fargo in your bargain basement bin, but them all! Like BJK, VFH also pays a nice little dividend while you wait for the market recovery! Unlike BJK, however, the financial sector is less likely to cut dividends based on historical data.
Whew, smell that! That shit smell is coming from the oil and gas sector ETF (XOP) which has been an absolute turd this year (and really for the last several years)! This dawg is down over 60% from it’s recent mid Feb high as oil prices have taken a nose dive due to the oil price war between Saudi Arabia and Russia. XOP has 59 holdings and is a great way to play they very volatile energy sector while spreading out your risk. The energy sector rebounded very nicely in 2016 after a similar oil price war in Feb 2016…history has the tendancy to repeat itself…just saying, but certainly not guaranteeing anything!
There are ETFs for many other sectors as well, such as biotechnology (IBB), technology (FTEC) and semiconductors (SOXX). Check out etfdb.com for more ETF awesomeness and research!
I’m not going to say that I’m smart enough to analyze individual companies and determine if they’re a solid long-term investment or not. Personally, I subscribe to a stock investor newsletter from Morningstar and a stock advisor service from Motley Fool which provide me with buy recommendations. That and hand selecting other stocks from reading and research on Zacks, SeekingAlpha and Yahoo!Finance is how I’ve put together and managed my portfolio over the last five years. In selecting companies for the market rebound, I looked simply at stocks I felt were excessively beaten down that I projected had the financials to survive and rebound. Many of these stocks are down over 60% from recent highs, some as much as 80%. I view them all as low-to-medium-risk/high-reward investments and I’ve taken or plan to take small positions in each. There are totes other good companies at dirt cheap prices in these sectors, these are simply the stocks on my radar. Bon appetite!
Airlines: Delta (DAL), Southwest (LUV), Alaska (ALK) and American (AAL)
Casinos and Leisure: MGM (MGM), Wynn (WYNN), Dave and Busters (PLAY), Disney (DIS), Expedia (EXPE), Marriott International (MAR) and Las Vegas Sands (LVS)
Cruise Lines: Royal Caribbean (RCL), Norwegian (NCLH) and Carnival (CCL)
Restaurants: Darden Restaurants (DRI), Dine Brands Global (DIN) and Texas Rouhouse (TXRH)
Others: Exxon (XOM), Chevron (CVX), Boeing (BA), Square Inc (SQ), HCA Healthcare (HCA) and Live Nation (LYV)
I personally believe that by buying a collection of these stocks and ETFs you can make an absolute killing in the next month to several years (however long this rebound takes). Typically, most of these are not companies and sectors I like to invest in for the long-term (5+ years) so as they’re approaching their previous stock prices from Jan/Feb 2020, I’ll be assessing them individually to determine if they’ll remain a part of my long-term portfolio, if I’ll sell and take my gains or maybe just sell off a portion and hold on to some.
IMPORTANT! From a tax perspective, unless you’re purchasing these ETFs/stocks in an IRA/401k, Uncle Sam is going to take a cut of your gains whenevs you decide to sell in the form of a Capital Gains Tax! If you hold your purchase for 366 days, you’ll pay Long-Term Capital Gains taxes, which, for most of us, is 15% of our gains! If you hold your stock for less than a year, you’ll pay Short-Term Capital Gains taxes which is the same as your tax bracket and likely over 15%…so plan accordingly when selling!
Look, there’s always risk when investing in the stock market. That is why diversification and dollar cost averaging are so important! During this market turmoil, I’m buying a lot of different stocks and ETFs and have been doing so for a couple weeks and I’m going to keep pouring new money in to the market over the next several months. I don’t know when the bottom will come or how long it will take the market to recover…nobody does. I do, however, have faith that before I retire in 20+ years that both of those things will happen so I’m willing to take a little risk right now in the quest for sick gains that I can diversify in the future and enjoy while I’m getting hammered poolside in Cancun trying to remember the names of my grandchildren’s favorite cartoons! The rich are going to get EVEN RICHER during and after this downturn because they know a golden opportunity when they see it! Let us try to get a few of the acorns that fall to the ground for us peasants 😉
And, I’ll say it one last time, before purchasing any stocks or ETFs, you should do your own research and consult a financial professional because, disclaimer, I’m not a paid finance professional.
Get wealthy my friends! There’s plenty for all of us…get yours…because I’m getting mine! See ya!