Ok so after some severe peer pressure from a certain few individuals *cough cough you know who you are! I decided to jump back on the MrMillionaireMindset blog from my extended hiatus and share some wealth creation and investment insights. To tell the truth this will probably be the last writeup on ‘finance and investing’ as behind the scenes I have been working hard on repurposing the site to focus on my passion for young adult mentoring, personal development and my Christ centred faith.
It sort of triggered me (writing from the luxury of my home) while many NHS frontline employees are currently risking their lives to help others. So first things first is to thank all those who are showing selfless love and courage in the fight against this pandemic. May God protect and bless you. My sincere condolences also goes out to those who have lost loved ones or who may have been affected directly or indirectly by Covid-19 – rest assured we are standing and praying with you!
Aite let’s get into it! So whilst a lot of us are at home being obedient to the guidelines you may have noticed the massive sell-off in global financial markets. Hence more people than I can count on both hands have asked for my opinion on what, how and who to invest in to take advantage of the current discount of global stocks.
Lets recap on what has happened to global financial markets for those that may not be aware (where have you been!?) so here are a few snippets:
Image source: BBC News
- FTSE 100 (-28.8%) : The London Stock Exchange comprises the top 100 UK listed companies.
- Dow Jones (24.1%): United States index comprising the largest 30 companies from across the stock exchanges in the US. Some household names make the list like Apple inc. and The Coca Cola Company.
- Nikkei(-22.2%): The leading and most-respected index of Japanese stocks. The index is composed of Japan’s top 225 companies traded on the Tokyo Stock Exchange.
Looking closely at the UK top listed companies we can observe dramatic one week losses alike to Financial crisis times of 2008.
Will the market crash continue?
To be honest the market could continue to crash but we just don’t know. What I do know is that even man like Warren Buffett (worth $85 billion) has said he’ll be looking for bargains during this market downturn. Oh yes – him and me included!
Lets face it. Investors are fearful right now. The CBOE Volatility Index (VIX) aka the fear index has catapulted recently. When the VIX rises sharply, it’s a clear sign that many investors are panicking. According to Buffet this is the time to maximise opportunities and buy when people are selling 🙂
If I were a betting man, I think market volatility will continue in the short term. The prospect of a recession or even depression is very likely due to the economic downturn with businesses having to close and many left unemployed and out of work.
So what to do now?
Ahhh the exam question. One of my friends recently said to me ‘enough of the analysis…just tell me where to put my money!’ Unfortunately, it is not as simple as that and I would strongly recommend that everyone reading this should do their own research before making any investment.
The stock market is significantly down from where it started the year. In my humble opinion, this makes now a good time to buy up undervalued shares. Bad news is priced into pretty much most shares with some particularly more-so than others. It makes sense to buy companies with strong balance sheets, diverse business operations, strong historic performance and solid cash flow given the uncertain economic outlook.
Through buying high-quality businesses at discounted prices your risk to reward ratio increases. In the long run this may enable you to retire early, and enjoy a growing passive income in older age. I don’t know about you but that’s certainly the strategy me and my Wife (Forbes 30 under 30 uno!) are 100% on!
Ok cool…but please just tell me who to buy?
Yooo remember I am not a financial advisor please! Go and do your own research! Haha so as a helping hand here are some insights into industries most affected by the pandemic where you could grab a bargain. The views below were not sourced from myself but having read I believe they make compelling cases.
Market crash-trashed travel and leisure
Companies in the travel and leisure sector have been particularly hard-hit due to the lockdown. These include some notable FTSE 100 names. UK-focused Premier Inn and other food chain owner Whitbread is a great example. International cruise ships group Carnival is another. Whitbread’s decision to keep all furloughed employees on full pay is a sign of management’s confidence. Meanwhile, Carnival has managed to raise £5bn to help it stay afloat through the crisis.
No-one is showing Barclays Bank any love. At beginning of April, the shares were currently trading at a near-70% discount to tangible net asset value.
The Lloyds Bank share price has dropped over 36% in a month. I think the dividend was the only good thing going for Lloyds recently. Without it, there’s not much reason for shareholders to stick around.
Mind you, over 100 companies have cancelled their dividends for 2020, including the likes of my beloved HSBC stock that I have invested in since 2014. I have never seen the HSBC share price so low so talk about value for money for a trillion dollar company!
Film, Entertainment and TV
FTSE 250 firm Photo-Me International have been hurt due to travel restrictions. Many of its photo booths and other vending operations are sited in areas of high footfall. eg shopping malls. However the CEO buying plenty of shares himself shows his confidence in the business.
ITV is being hit by the widespread suspension of corporate marketing spend. Is ITV going to go into insolvency? I doubt it but the share price is sure acting like it is. Hence I see this as another good stock for a market crash recovery.
Oil stocks are being crushed by the plummeting price of oil. Russia and Saudi Arabia have ramped up oil production to impact US production. Others companies in the US can’t afford to produce oil at such low prices. This means they face prospects of going out of business despite Trump’s best efforts. Personally I feel the big oil players such as Royal Dutch Shell and BP are unlikely to go bankrupt and are worth looking at.
Here are some tweets I found on how cheap petrol at the pump is – as a consequence of the oil decline. Shame we can’t go anywhere to actually utilise it! Also filling up your tank for future use does not count as ‘essential activity’ to leave the house so please don’t try this at home!
Other interesting picks outs
Lastly I read a recent report that said Walt Disney is a great stock to buy with its share price hammered by coronavirus as a consequence of the lockdown. No-one is buying cars, moving house or flying so Auto Trader (UK’s leading vehicle advertising portal) and Rightmove (Online property the largest company of its type) and easyJet are all staple companies looking like bargains right now.
So there you go…some food for thought. Please do not treat this as investment advice and get up and invest without doing your proper due diligence. If you do not listen to this warning and go ahead then you probably deserve to lose your money. Yeah I said what I said!!
Investing in your financial future
If you have savings or the ability to save a small amount each month, then look no further than a Stocks and Shares ISA. As of April 6th 2020 we are into the new financial tax year so you can invest up to £20,000 without paying tax on those returns.
If individual stocks are not your bag then consider the indexes mentioned which is also another great and less risky alternative. When investing, remember to diversify and to not put all your eggs in one basket.
Investing is not a get rich quick scheme and I would consider any serious investment to be like a minimum of 3 to 5 years to ride any market bumps and shocks. Also do not part with anything that you are not prepared to lose. Ultimately long-term investing requires patience, discipline, and resilience.
When the Covid-19 crisis is over and normality resumes, upside volatility could be incredibly rewarding helping you work towards building a brighter financial future for you and your family. In addition a rapid market recovery could make future millionaires out of brave investors.
Hope you found this useful – would love to hear your feedback so please drop a comment below. In the meantime I am putting down the pen and retreating back into my hiatus 😀
Stay safe. Stay home.
This content should not be considered qualified financial or investment advice and MrMillionaireMindset accepts no liability for any financial losses.
Image Sources: BBC News
Investment Sources: The Motley Fool and The Financial Times