In today’s Exponential Investor

  • Too much on Christmas lights
  • Discounts everywhere
  • Should you be scared?

It’s that time of the year again.

Season’s greetings…

That time when people typically lose their minds.

All to save a few bob on some Christmas pressies for the kids, or for that appliance you’ve been waiting to add to the kitchen collection for months.

In the past, we’ve even seen people come to fisticuffs over a LED TV.

As I say, it’s the time of year when people lose their minds.

That’s because Black Friday sales are upon us.

Cheap(er) booze, toys, electronics, gifts for him and her, you name it, everything is on sale in that last week of November. It tickles our “retail therapy” bone more than any other shopping period of the year.

And after a rough year, why shouldn’t you spend a little on yourself?

I fully advocate a bit of retail therapy from time to time. I’m even known on the rare occasion whilst out shopping with my wife to just say, “treat yoself” to her.

That means, we’ve got ten minutes to buy anything we want in the shop… literally anything.

It’s nice to treat yourself. And, if something that you’ve wanted for ages is finally discounted and you can afford it, then why not buy it?.

This advice doesn’t have to apply solely to consumer goods, either.

You might have been eyeing up a particular investment for a while too. And occasionally, when market conditions are right, you can find a few bargains in the stock market too.

The stock market’s “Black Friday” sale

Meanwhile, markets are having a Black Friday sale of their own.

Stock prices are being slashed because a few factors are causing fear and panic in the market.

Namely, it seems that yet another Covid-19 variant is imminently about to wipe out all life on earth.

Such fear can engulf the market like a wildfire. One moment everything seems fine, the next it seems the whole bloody thing is burning down around you.

This, of course, can lead to some shaky times yourself. You inevitably flip open your trading app, see your portfolio down, red across the board and ask yourself a pretty simple question: is this going to get worse and should I sell my positions?

It’s only natural to ask yourself these questions. It’s only natural to be fearful when everyone is fearful.

However, in moments like this you need to revisit two core foundations of your investment strategy:

  1. What is your overall plan?
  2. What is your timeframe?

If your plan is to build wealth over the long term, then the swings and volatility in the market we’re currently seeing aren’t something to be overly fearful about.

In fact, the timing is quite nice.

If you were planning on buying a bunch of stuff as a form of retail therapy, maybe there’s a new question you should ask yourself too: would this money be better off invested long term?

I reckon nine out of ten times the answer to that question is yes.

With the kind of market moves we saw on Friday, I think the timing is great to add quality stocks to your portfolio that are a bit cheaper than they were the day before, or add to existing positions that you’re slowly building over time.

When you have a long-term investment horizon, then you can keep calm and carry on with your strategy.

But there’s a slight issue with that as well…

Should you actually be scared?

There’s a lingering threat that is worth bearing in mind too.

What if this new Covid-19 variant gives governments reason to impose draconian restrictions on society again?

If this happens, will stocks get hammered like they did in March 2020? Or will volatility be confined to the short term?

None of us have a crystal ball, so we never know for sure.

But that means the smart investor should prepare for both outcomes.

If the current volatility is short-lived, then current share prices absolutely present a buying opportunity. And the sectors that get hit hardest from it, such as outdoor events, consumer services, aviation – basically anything that requires footfall – are ones to consider for those with longer term mindsets.

On the other hand, if we’re going to see disruption akin to that of March 2020, then perhaps Covid-friendly stocks – such as work-from-home and activities at home companies – are ones to consider adding to your portfolio.

We looked at a few of them last week, in the “Ultimate 20-year shopping list”. If we see another round of Covid-19 variants, lockdowns and social unrest, could this boost these stocks back up?

Or, maybe everything will get worse before it gets better? In that case it’s also prudent if you are shopping for some stock market “Black Friday” deals to not load it all into the market, but squirrel some away in the event that prices head even lower.

Either way, the long-term view must be kept in mind. There are stocks to fit all occasions; ways to play the market when its fearful, and ways to play the market when we move past the pandemic.

In my view, as long as you have a plan, you’ll be well prepared for whatever comes your way and there is no need to be scared at all.

Until next time,

Sam Volkering
Editor, Exponential Investor