As the business world responds to shutdowns, slowdowns, and re-openings as part of COVID-19 responses, even the most resilient operations are feeling negative impacts. This has the knock-on effect on investments and investment opportunities. Are there investment opportunities in this time of turmoil?
“We’ve discussed some strategies for investing during this global crisis,” explained Richard Cayne of Meyer International in Bangkok Thailand. “While there may be some cause for concern, there are many more sources of opportunities. If you know where to look.”
Stock prices dropping = buy the dips?
“Buy the dips” in this case is an investment strategy, not an errand before a party! Buying the dips refers to purchasing an asset when its price drops, assuming it will reverse its trajectory. Normally, you would look to an asset that historically has had a strong showing but that has currently hit hard times. The theory being that the downturn is temporary, and the asset will recover, making you money.
Right now, many financial pundits and expert investors are advocating buying the dips. The COVID-19 is a worldwide phenomenon that is an external factor affecting supply chains and operations everywhere. Many are confident that strong performers will recover from the initial shock of the business shutdowns. Apple, Johnson & Johnson, as well as the S&P500 and the Dow Jones Industrial Average have all shown signs of recovery already.
Buying the dips requires some finesse
If stocks are recovering, does that mean it is too late to buy the dips? Not necessarily. You need to analyze the different opportunities. As the world adjusts to life with COVID-19, there may be other price fluctuations that you could benefit from. But there also requires some caution. Just because a stock drops now, does not necessarily mean that it will recover. What was the reason for the drop? Does the company have the resources to adapt and regain its losses?
You also should consider your risk appetite. Your portfolio may be in good shape, technically speaking, in that it is positioned to recover as the overall economy recovers from the pandemic. How to know? While there is no magic formula that works for everyone, it is always helpful to discuss your options with a trusted financial expert, like Richard Cayne. He can help you decide if you are ready to buy the dip and how you can make the most of it.