The idea for this fund is simple. The 1990s brought the rise of the index fund, and its popularity since then has only increased among investors. As a result, stock movements have become more correlated, as people and institutions buy and sell whole indexes, all the holdings in the index move with it. Our recent market crash was entirely news driven (COVID-19 and oil price war), and the index was heavily sold, bringing all the index holdings down with it. Every single major price move since mid February has also been news driven, and nothing to do with technicals, even though some technicals inevitably will align by coincidence (I am not anti technical analysis, it just is obvious to me that isn't what's driving this current market). For certain companies, such as airlines and oil and gas companies, a big drop in price is well deserved. However there are many more companies which will continue making earnings just as usual, yet their stock has been pushed very low. This is the opportunity for a simple buy and hold.
Criteria for the stocks in this quarantine investment fund:
1) Well established American companies with at least $2B market cap (most are in S&P 500).
2) Have a business which will continue to operate profitably without being adversely affected by an ongoing pandemic lockdown, as far as I can tell anyway. Probably resilient to most other natural disasters too.
3) Have suffered severe price drop along with the rest of the market. This selling was mostly due to the fact that they were a member of the indexes which were being sold.
4) Stock was trending up or sideways prior to market crash.
When to buy? Now looks good.
Have these seen the bottom? No idea. Listen to the experienced old timers who will advise you not try to time that. The important thing is that these are well priced right now.
How long to hold? 1 year minimum to get long-term capital gains tax treatment. (N/A for IRA)
How much? Not so much that you lose sleep at night, but enough to be meaningful with a 30%+ return.
What if you're wrong? That will teach you not to take stock tips from people without having your own convictions, a valuable lesson!
The companies which met the four criteria outlined above:
AES (Electric Utilities)
BHF (Life Insurance)
LNC (Life Insurance)
ALL (Insurance)
WFC (Wells Fargo Bank)
SCHW (Charles Schwab)
CVS (CVS pharmacy)
JNJ (Johnson & Johnson)
GLIBA (Telecom)
DAR (They take plant and animal byproducts to create fertilizers, animal feed, and human food. They have 200 processing locations on most continents.)
RSG (Waste management. This is an essential service that will continue uninterrupted.)
Criteria for the stocks in this quarantine investment fund:
1) Well established American companies with at least $2B market cap (most are in S&P 500).
2) Have a business which will continue to operate profitably without being adversely affected by an ongoing pandemic lockdown, as far as I can tell anyway. Probably resilient to most other natural disasters too.
3) Have suffered severe price drop along with the rest of the market. This selling was mostly due to the fact that they were a member of the indexes which were being sold.
4) Stock was trending up or sideways prior to market crash.
When to buy? Now looks good.
Have these seen the bottom? No idea. Listen to the experienced old timers who will advise you not try to time that. The important thing is that these are well priced right now.
How long to hold? 1 year minimum to get long-term capital gains tax treatment. (N/A for IRA)
How much? Not so much that you lose sleep at night, but enough to be meaningful with a 30%+ return.
What if you're wrong? That will teach you not to take stock tips from people without having your own convictions, a valuable lesson!
The companies which met the four criteria outlined above:
AES (Electric Utilities)
BHF (Life Insurance)
LNC (Life Insurance)
ALL (Insurance)
WFC (Wells Fargo Bank)
SCHW (Charles Schwab)
CVS (CVS pharmacy)
JNJ (Johnson & Johnson)
GLIBA (Telecom)
DAR (They take plant and animal byproducts to create fertilizers, animal feed, and human food. They have 200 processing locations on most continents.)
RSG (Waste management. This is an essential service that will continue uninterrupted.)