Time to adjust strategy?
Updated: Jul 3, 2020
So the markets kept getting destroyed last week. At this point, I am not even looking at the percentage drops anymore. I think its going to fall even further primarily because in my opinion, the Western world has not yet felt the full effects of the C-19. Many European cities are going into lockdown, but the situation has become so bad that within 2 weeks, some countries like the UK have changed their strategy to contain C-19 dramatically.
While most of the world is practicing social distancing, it seems like the UK is advocating for herd immunity, which to me is a sign that they are on the verge of giving up. This, while theoretically is supposed to be good for the market because it will put the majority of the working population back to work. However, it is a very risky strategy as we don’t know if it will work and if it doesn’t could actually accelerate the effects of the pandemic. Anyways, my point is that things are likely to get worse....much worse.
What does it mean for my portfolio? Well, last week I have sold out of my remaining positions which were still in the positive. These are namely all the ETFs that were in my Stashaway account and also my position in Abbvie. That has been a good move because the prices fell a great deal after I sold them off. I can always buy Abbvie back later at a lower price.
I have also added Tesla back into my portfolio (after taking profits last month). I forsee Tesla’s price falling even further, possible to the low 300s, so I am not buying it all at once. I have been averaging down, and buying a little bit every time the price drops. My strategy for my cash right now is to pick a small group of stocks which I think will rebound the fastest during a recovery and slowly average down.
My overall value has been drilling downwards, but I am not even looking at it anymore. That’s because the entire market is down, so nothing I do can actually reduce the speed at which this is tanking. So I will just continue to wait it out as it will definitely recover in the long run.
As for my dividend stocks, I am being cautious on which stocks I buy. In this market, the dividend yields look extremely attractive due to the low prices. However, I have to also remember that some or most of these dividends will be reduced or completely cut because these businesses’ revenues will be badly hit for the next 2 quarters at least.
What should I do next?
There are a few options that I can take and I will be focusing on.
Firstly, right now cash has become very valuable. With almost all investment vehicles dropping, consolidating cash can be an essential card to play when the time is right. So, I will be very selective with where I put my cash.
Next, find stocks that will recover the fastest. There will definitely be some companies that will race ahead once the economy starts to recover in the coming months. Those who put their money in these stocks will also benefit the quickest. I have written about Tesla twice in the last 2 weeks and I believe that they could be one of the winners. I will be keeping a close eye on other potential winners.
Finally, I will also need to find companies that will keep their dividends steady during this time. These will be the companies that are affected least or even benefit from the recession. But with the uncertainty in the market these will be hard to find as well.
So lets see if this coming week is a good one or if we can get some clues as to what might happen in the future.
Disclaimer: This post should not be interpreted as investment advice as I am not a professional financial consultant. The objective of this blog is to share my experiences with others and receive feedback. I will provide links to my information sources to the best of my abilities, but the reader is responsible for their own due diligence