The Australian stock market has been crushed by the coronavirus so the question I’m getting day and night is: “Should I buy stocks now and what stocks?
And some potential investors might be worried that they’ve missed the boat.
So is it stock-buying time?
The simple answer is yes.
The more complex answer is, before you lay out your money on stocks that could violently go up and down over the next few weeks (or months), there are a few things you need to understand.
This chart helps my answer to the big question: Is it time to buy?
You can see the huge drop in stock prices caused by two things — the coronavirus hit on humanity and the cost of containing and beating the virus.
That’s the market snapshot but the impact of these two negative forces for stocks is best seen in the stock price action for a world-class company such as Qantas.
The airline is not only copping the fear factor sell-offs hurting just about all stock prices but it has been beaten up by travel bans.
However, note that little pick up in its share price after the Dow spiked 11.3 per cent on Tuesday this week.
That was a 21 per cent spike by lunchtime on our first trading day after Wall Street surged on news that a two trillion dollar US stimulus package was coming ASAP. And now that has been announced, the market in the US will react.
Meanwhile the overall market was up only 4.1 per cent and some of that restraint was caused by additional federal government restrictions on business that were announced the other night.
I think the economic rescue from governments, central banks and the assistance of banks in lending money cheaply and even allowing virus-affected borrowers to defer loan repayments are all great for future stock prices.
However, it will be virus statistics that will ultimately determine when stock prices rise and then really rise.
If you bought in the last few days, you could see your stock price on bad coronavirus data news and you could lose some money but over six months, 12 months and three years I reckon you’d be very happy with your decision to go long stocks.
So what stocks should I invest in?
To get the whole top 200 companies in the S&P/ASX 200 Index, you can buy an exchange traded fund with the code IOZ or A200.
You can get the top 500 companies on the US stock market via the ETF with the code IVV for a low cost 0.04 per cent or 4 basis points.
And if you want a ‘stock’ or ETF that specialises in paying dividends, you can think about my SWTZ exchange traded fund listed on the stock market, or funds just like it. My fund focuses on the big top 20 or 30 companies, which some experts think will rebound fast once the virus data turns less negative and scary.
I hope their best guess is on the money.
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