We hope you’re having a great start to 2022. The volatility of the markets may seem concerning to many investors but we’re going to present our take on a down market and why we view it as an opportunity.
Our view:
Whether the market is up or down, we don’t care because it’s good news either way! Why?
When the markets are on a rise 📈, it’s an opportunity to lock in gains and sell for profits.💲 Â
When the markets dive 📉, it’s an opportunity to buy more shares of attractive companies at a discount💰
Let’s take a look at the Market Crash Timeline going back over 100 years and what can you conclude? 2 things:
1. It’s difficult to predict how long the Market Crash & Recovery period will be. So there’s no point trying or listening to someone who makes ‘crystal ball’ predictions.
2. As long as you’re buying valuable businesses, managed by competent leadership, the equity markets can reward investors for taking risks in the long run.
Reference: https://www.morningstar.com/features/what-prior-market-crashes-can-teach-us-in-2020
However, the markets can offer “hidden gems” that offer high-risk; high-reward investments that can explode in a shorter period of time. These “gems” 💎 are considered high-risk because they haven’t established themselves considering they’re still in a startup or growth phase. Whether they succeed will depend on multiple factors including:
a. Market timing – How relevant is their product to ‘currently’ provide a solution to a problem on a large scale?
b. Cash Flow – How much of a cash runway do they have (access to capital), before they run out of money?
c. Leadership & Management – Does the company have access to a network and experience to help the company succeed, or is this their first rodeo?
If you made some stocks picks, but picked them up at a higher price and the price has since dropped, it’s important to distinguish whether the price dropped because of “market sentiment” or because the company is failing to make “progress.”
Market sentiment generally makes a stock recoverable, while failing to progress can make it unrecoverable.
If you believe in a company’s value proposition, then consider a price drop simply as an opportunity to pick up more shares at a discount price, thereby lowering your overall average cost for the stock.
The goal at TFSAmillionaire.com is to search and present these “hidden gems” albeit they may be few and far between. If you register for the course: TFSA Millionaire: Investing for Profits Made Ridiculously Simple! you can learn HOW to find profitable stocks on your own and WHEN to buy & sell stocks. As an added bonus, our favourite TFSA Millionaire stock pick alerts are included with your course registration.
We wish you a healthy and prosperous 2022!