Stocks are crashing. What now?

The last week was the worst week for a few years. Throughout the entire week, there was not a single day that the markets would have gone up. Everything was crashing. Tech, utilities, income. My personal account with dividend/income stocks is down to -16,47%. My speculative portfolio was 40% up just the week before and is now back to a mere profit of only +0,16%.

So what now?

The answer is pretty easy. Nothing. I am not selling anything. I don’t sweat in fear. I don’t panic. The only battle I have right now is in my mind: When to buy the next batch of shares.

I have transferred some additional cash to my stock account and will keep it there for a few days, or maybe even weeks, with the aim to pick up shares of my already purchased companies when they get to a point that I will consider them to be undervalued.

Quality first

JFK famously said, “a rising tide lifts all boats”. Well, this also works the other way round. But while a rising market benefits preferably speculative stocks which rise on hopes and expectations, a falling market will test and distinguish the quality of your picked companies within your portfolio.

While all stocks are likely to fall, the quality ones will fall less dramatically. These are the stocks that you should keep in mind for a re-purchase because after the fear is gone, they are more likely to recover or climb even higher much quicker. Companies of lower quality might fall further and are statistically less likely to recover at the same pace.

The long-term investor’s playbook

So the recommended approach now is this:

  • Don’t panic.
  • Don’t sell.
  • Keep it cool and use the opportunity to identify your quality shares.
  • Get some cash ready. Wait for the fear to diminish.
  • Add more of your quality shares at the best possible value.

Happy investing!

To space and beyond!

Investing in the stock market always involves risks. In financial jargon, we have something called a “magic triangle”. It describes and shows the relation of the three cornerstones of any financial investment: Profit, security, and liquidity. You can never have all three maxed out.

The more your investment tends towards one cornerstone, the less the other two will get applied. I.e.: An investment with a high return (profit) will offer less security and fewer options to get to your money if you need it (liquidity). On the other hand, a highly liquid investment with a safety margin will usually offer a significantly lower profit. You get the picture.

Taking a hit

Why am I bringing this up? Because I just took a strong hit and realized a loss of almost 2000 Euros on my investment in the Dutch REIT (Real Estate Investment Trust) Wereldhave (WRDEF) The shares are caught in a downward spiral for a couple of years now and after two dividend cuts and a decline of almost 65%, I have decided to get out of it.

Frankly, I got out way too late. I should have acted sooner but I still had the expectation for a rebound. I was also quite comfortable with the high dividend yield of 10% in the first year, and still 6% after the first dividend cut. But the second dividend cut would bring the yield down to only 4%, with a perspective of even further reductions down the road. It’s just too many negative points that piled up.

Moving on

2000 Euros is a lot of money. But, I had no feelings at all while exiting the position. A key factor to success in investment is emotional control. It also helps that I have enough other stocks to balance this loss. Especially the recent run-up in Apple (AAPL) was of great support on that front. My Apple shares are up 96% and I sold a small chunk to make up for the loss and to spread/diversify my investments a little more.

Also, as some readers might remember, I had another great success story. My investment in Virgin Galactic (SPCE) as recent as only 2 months ago, back in December. While I invested only a tiny amount of 270 USD (250 Euros), the company had a stellar run for the last 2 weeks and is up 242%, meaning that my investment more than tripled, almost quadrupled. I bought in 25 shares at 10,57 USD and sold yesterday 8 shares at 35 USD. Of course, it’s not enough to balance the loss of 2000 Euros, but let’s see where this goes. With the sales of 8 shares, I already got over 100% return on my investment and I still kept 17 shares for whatever happens in the near or distant future. Several analysts see this company already as the Tesla (TSLA) of space.

Exciting times.

Disclosure: As mentioned, I owe all the stocks mentioned in this article except for Wereldhave (WRDEF) which I just sold.

Video Calls are… lame?

In the last 10 years or so, technology was (and still is) one of the main drivers of entire markets. Technology companies rule the stock market and our lives. Anti-capitalists like to point out that the idea of never-ending growth is a failed concept as our resources are limited. But technology is the solely needed proof that there are indeed no limits.

We constantly discover new ideas. We re-define processes, constantly improve efficiencies, and discover new connections and dependencies which allow us to disrupt and re-imagine entire markets. This process will never end, it’s part of who we are and I am a firm believer that our creativity has no limits.

Having said that, there are occasional trends in technology popping up which might be divisive, or, let’s call it interim solutions. One of those current trends: Video calls.

I hate video calls

Yes, I admit it. I do video calls sometimes. They may be useful or even necessary for conference meetings and business purposes. They are great to contact your loved one when they are far away and you really want to see their face.

But turning all calls everywhere into video calls is just super-annoying. It’s almost as annoying as all those Instagram accounts where people are posting filming themselves talking into their phone-cam.

First of all, it’s already annoying to have people in a restaurant, gym or hotel lobby being constantly on a normal phone. Seriously, being on the phone in public places and pushing your voice on everyone in the room is not always a pleasure. When you add a video to it and turn on the speakers of the other person, this annoying factor doubles up.

Secondly, while privacy might be already dead, it doesn’t mean that you and the person you speak to NEED to share all your thoughts, ideas and issues with any stranger who is around. In terms of business, this can even be seriously dangerous.

Third, respect at least some privacy of other people. As soon as you turn on a camera, you will immediately display locations and faces of all those people around you, and with the current technology and very lax data protection, this information can be easily exploited and utilized by other parties. Facial recognition can already track and allocate names, faces and locations in any stupid Facebook or Instagram pic without you even knowing that you might expose other people to potential harms. From jealous girlfriends tracking their boyfriends (or vice versa) to criminal elements who might want to break into your home while you are on vacation. Yes, as a hotel manager I am always telling my guests to not post pictures until returning home. Why would you inform the entire world that you are on vacation a thousand kilometers away and your home is standing empty and ready for a heist?

The demand for video will grow nevertheless

But still, my voice may not count for much here and I am quite sure that the demand for videos will keep increasing in the future. So how can investors profit from this development?

The most popular company in the world for video calls is Skype, which belongs to Microsoft. Given how Microsoft evolved in recent years, it is certainly not a bad investment and I don’t see anything that could disrupt its business model any soon.

But for those who are willing to take a little more risk into account, there is another emerging competitor: A small company called ZOOM Video Communications (ZOOM). I have it on my watchlist and plan to purchase some shares next month. The easy-to-use software is miles ahead of Skype in terms of picture and sound quality and is becoming increasingly a favorite for start-ups and SMEs to work with.

However, as with every small player, it’s still hard to predict how the company will develop and investors seem to be torn at the moment. The shares are being publicly traded only since April last year, and the share price is bouncing up and down between 60$ and 100$, so it’s nothing for the light-hearted. Personally, I am also expecting the share price to come down a little bit before I will initiate a first small position.

ZOOM doesn’t pay a dividend, but if their concept will prove reliable and profitable enough then it will happen sooner or later. There is also a chance for the company to be taken over by a larger competitor, which could increase the value of the company exponentially. Therefore, I consider an investment in such a stock as a calculated risk and I will usually not put more than 300-500$ into such stock.

If it doesn’t work out, my losses are limited. But if the company turns out to be a winner, the resulting profit can be significantly higher than even 10 years of stable dividend payments from a dividend stock. The risk-reward ratio is worth consideration.

And if it turns out to be a winning stock, then I might reconsider my opinion about video calls. At least I would give them some credit for financing my early retirement.